Endowment, DAF’s, and Foundations Impact in 2023 and Further
I am worried….and you should be, too!
My concern comes with a caveat. If a nonprofit organization is too heavily dependent on endowment or grant opportunities, I am deeply concerned. For organizations that have a well-diversified donor role, mainly through individual giving, the concern is greatly diminished.
A recent study completed and articulated through the Chronicle of Philanthropy indicated, what I might consider, a massive drop in philanthropic endowments and other investments over the past year. By one estimate, it was nearly a 20% decline in these types of funds during 2022. This would include any invested funds such as endowments, donor-advised funds, or foundations that grant money.
You can see my concern. If the corpus in any of the above-mentioned funds dropped by 20%, it will be challenging to maintain granting levels when there's less money in the principal. And unless there is a dramatic change in the markets in the early part of 2023, which I don't anticipate, this means less money to be granted out to nonprofits, who possibly depend on it too much.
Additionally, mostly anecdotal, I'm seeing endowment-like funds diminish their percentage of expectation of investment revenue and its allocation to nonprofits. What ten years ago was thought of as a standard 5% draw is now diminishing to as little as 3%. Combined with the above-mentioned drop in overall endowment levels, this signifies a major change to possible dollars available to many nonprofits who seek granting support.
And while not studied, if investments are dropping for organizations such as endowments, foundations, and donor-advised funds, the same general negative investment strategy is certainly realized by many individuals as well.
A well-diversified prospect and donor pool, regardless of whether it's an organization or individuals, is more important now than ever. Failure to do this with a well-thought-out plan may greatly limit revenue options for many in the non-profit space.
