Private Foundations Enjoyed Growth Surge in 2017

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.