Actually, Foundations Keep 95% of Their Endowments

Some foundations are modeling improved transparency and greater diversity among the people responsible for investing endowments.

(Photo by Ramy Majouji / CC BY 2.0)

The open secret about philanthropy is that more resources are put behind making money than giving it away. For a private foundation to keep its tax-exempt status, the IRS requires only 5 percent of its endowment be spent each year on charity. 

What isn’t often known is whether the money-making operation shares its values with the grant-making team. 

In this episode of the podcast, Next City executive director Lucas Grindley talks with senior economics correspondent Oscar Perry Abello about his reporting on the ways foundations invest their more than $1 trillion in assets. And we talk with Erika Seth Davies, who co-founded the Racial Equity Asset Lab, about her years of advocacy calling for foundations to shift more control of their endowments to asset management firms led by people of color.  

“I thought, you know, once we talk about this, people will be on it,” said Davies of the slow pace of change. “But I did not fully grasp how entrenched the system is, how implicit bias plays into it deeply — and I will use ‘implicit bias,’ but racism is, fundamentally, kind of guiding a lot of that decision-making. People don't don't realize the things that are mistaken for rigor, right? Habit has been mistaken for rigor. And those habits are fundamentally racist.”

Listen to this episode below, or subscribe to Next City’s podcast on Apple and Spotify.

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