(Graphic: Foundation Source)

Private foundations with less than $50 million in assets earned more, gave more and received more contributions from their donors last year than they did during 2016, Foundation Source, a support services provider for private foundations, reported this week.

The report’s findings were based on Foundation Source’s analysis of the activities of a sample of 927 of its private, non-operating client foundations with assets of less than $50 million. For inclusion in the study, foundations had to have been clients during the 2016 and 2017 study period, and to have been in existence at least three years.

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Even accounting for grants and expenses, the overall asset balances of the foundations in the report grew by 13.2% in 2017, compared with 6.6% growth the year before. These gains were attributable in part to last year’s bull market.

In the aggregate, assets held by the 927 foundations increased from $4 billion at the end of 2016 to $4.5 billion by the end of 2017.

At the same time, donors went above and beyond their robust investment returns to fund their charitable giving. They contributed 83 cents to their foundations for every 89 cents they disbursed as grants and related expenses.

“The high rate of contributions is a good indication of donor commitment to and enthusiasm for their private foundations,” Page Snow, Foundation Source’s chief philanthropic officer, said in a statement.

“Rather than relying on investment returns, donors are providing infusions of fresh capital to fund their charitable interests.”

The 927 private foundations in the study group collectively gave $285 million to charity in 2017, $19 million more than in 2016. Not only that, these foundations exceeded the mandatory 5% distribution requirement, on average distributing 8.2% of their assets for charitable purposes.

Small foundations, those with assets of less than $1 million, gave 13.4% of their assets.

According to the report, most funding categories received about the same share of grant dollars as in 2016. Grants to education and human services, which have long proved popular with private foundations, continued to be the top sectors.

Although private foundations continued to be a reliable source of general operating support for recipient nonprofit organizations, they increasingly favored specific purpose grants in 2017. These grants rose by 3.6 percentage points to 63.9%, with large foundations, those with assets between $10 million and $50 million, showing the strongest preference.

Last year, the foundations in the study allocated 51% of their overall investments to equities, up 3.9 points from 2016. Small foundations, too, upped their allocation to equities last year, to 55.4% from 50% the year before.

These small entities also had much higher cash holdings, 19.8%, than their larger counterparts. The report explained that because these foundations disburse a larger percentage of their assets in grants and expenses, they need to maintain liquidity to fund their activities.

“At this point, it’s unclear whether strong 2017 earnings will be predictive of a grantmaking spike in 2018,” Snow said.

According to the report, last year’s investment gains could translate into increased charitable support this year, as the annual minimum distribution requirement for private foundations is based on calculating the net assets of the previous year.

“We’ve been conducting these studies for a decade, and consistently, we see clear evidence that these foundations punch above their weight, even in unfavorable economic climates,” Snow said. “If current economic trends continue, it could bode well for 2018 charitable distributions.”

— Check out Fewer Americans Donating to Charity on ThinkAdvisor.