Overview

A large foundation decides to spend down, and completely alters its operational model.

From its founding in 1982 until 2001, The Atlantic Philanthropies, a large Bermuda-based foundation started by Charles Feeney, a co-founder of Duty Free Shoppers, operated anonymously. In the late 1990s, according to John Healy, who recently retired as the foundation's CEO and was succeeded by Gara LaMarche, Atlantic began to commit funds at a rate that would not allow it to exist in perpetuity. He suggested that Atlantic formalize a deliberate policy of spending down, and in 2002 the decision was made to spend its entire endowment of nearly $4 billion before 2020. Reasons included respect for the views of Feeney, a believer in "giving while living," who sits on the board but does not dictate Atlantic's direction. Healy also notes that foundations that exist for long periods of time "don't necessarily improve as they get older," that spend down gives "a productive air of urgency to everything that you are doing," and finally, "If you spend your money in a short period, concentrated, wisely, you have a better chance of having significant impact on issues you care about."

The decision to spend down - through an annual grants budget of $300-$350 million - required enormous organizational changes in the foundation. Atlantic repositioned its grants program, eliminating some long-time areas of concentration. It created a more formalized grant-making process, integrated its far-flung country offices, which had previously operated independently, and assumed a more public profile. It instituted a dedicated in-house evaluation team. It increased staffing by 22%, to about 100 employees; there was also significant employee turnover. The operational change in the foundation between 2001 and 2005 was detailed in a study by McKinsey & Co., published in The McKinsey Quarterly in September 2006. The process, according to an executive quoted in the report, was "messy."

In this new incarnation, Atlantic limited its grantmaking program to four areas: aging, disadvantaged children and youth, population health, and reconciliation and human rights. It gives grants in seven countries; each program operates in three or four of those countries. Because of its limited lifespan, Atlantic's grantmaking philosophy now includes larger grants to fewer grantees, long-term relationships with those grantees, a focus on problems that allow for impact within the spend down period, and manageable goals. Healy says, "We focus on a small number of countries, a few projects. Our objectives are unusually specific. We keep our focus narrow, and don't take on grandiose goals. We could spend the whole endowment in one year on AIDS, but it would be a waste. Our approach to health in countries where we are [Vietnam, Australia, South Africa] is that if the very praiseworthy efforts to devise a cure for AIDS have results, we will need a strong public health infrastructure to get that cure into people's bodies."

The large grants budget (an initial $300 million for 2006 became $400 million; and the foundation's investment performance for the year actually resulted in an increase in foundation assets, despite risk-averse investment strategies) means that Atlantic has the capacity to give out big single grants, such as $14 million for KIPP (Knowledge is Power Program) Academies in the US. With such large sums at stake, Atlantic has to pick its grantees carefully. Healy says, "We want to get involved with grantees that have figured out ways of dealing with particular social issues, that are proven to work and that merit expansion, or with grantees with promising approaches that are worth evaluating rigorously, and if justified, expanded. If you compare us to the world of venture capital, we are not providers of seed capital, the first stage. We are the second or third stage investor, driven to that by limited life. We don't have the time to cast our bread on the waters and see what happens."

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  Resources

• Executive Summary
• Full Report
• Order Print Copies

  Report Contents

• Introduction
• Focus: The Whitaker Foundation and the Helen F. Whitaker Fund
• The Learning Curve: The Beldon Fund
• Retooling for Spend Down: The Atlantic Philanthropies
• Giving While Living: The Richard and Rhoda Goldman Fund and the Lewis B. and Dorothy Cullman Foundation
• Quick Spend Down: The Haigh-Scatena Foundation
• Raising the Payout: Evelyn and Walter Haas, Jr. Fund
• Giving 5.5%: The Lynde and Harry Bradley Foundation
• More than Investment Returns: The Needmor Fund
• Ramping Up: The HKH Foundation
• Using All the Models: Endswell Foundation / Renewal Partners
• A Different Strategy: Omidyar Network
• Conclusion
• Selected Bibliography
• Resources
• List of Profiled Foundations
• Acknowledgements

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