Foundations of Wealth Revisited: A Story of Growing Potential…

For three years Factary produced a ‘Foundations of Wealth’ report focused on the Ultra High Net Worth Individuals (UHNWIs) and High Net Worth Individuals (HNWIs) (minimum estimated wealth of £10m) that founded grant-making trusts and foundations, featured in Factary’s New Trust Update during 2012, 2013 and 2014. We have now revisited these trusts and foundations to see how they are performing financially and what this means for hopeful beneficiaries.

 

These three reports, all available for free to New Trust Update subscribers via the new online archive service, contain profiles of 104 philanthropists and their grant-making trusts and foundations, of which nearly half are not on Trustfunding.org. Top of the list in terms of estimated wealth is Mrs Usha Mittal (£9.2bn) with other billionaires including the Swire family, the Fleming family, Ian Livingstone and Spiro Latsis. Together they have a combined estimated wealth of £34.36bn – the question is, how much of their wealth are they giving to charitable causes?

 

Based on financial information from the last financial year 98 trusts and foundations (six are still yet to submit their first set of accounts to the Charity Commission) had a total expenditure of £26.17m. Only seven had a total expenditure of over £1m in the last financial year whilst over one in 10 had an expenditure of £0 despite some having been registered for three years now. This is somewhat disappointing, especially when compared to their estimated wealth which shows that the average expenditure as a percentage of estimated wealth is a meagre 0.08%! Only seven individuals gave over 1% of their estimated wealth to other organisations in the last financial year, with the most generous person giving just under 3% of their estimated wealth as grants. This is well under the ‘5% of total assets’ figure that is often used as the basis for estimating gift capacity for major donors…

 

The biggest giver in terms of charitable expenditure was Sir Peter Harrison – former Chairman and Chief Executive Officer of computer network company Chernikeeff. The Peter Harrison Heritage Foundation had a total expenditure of £4.5m in 2013/14 which included a grant of £2m to the Clarence House Restoration Project and £1.75m to the Imperial War Museum.

 

The most generous philanthropist, giving away the greatest percentage of his estimated wealth as charitable expenditure, was Sir Mick Davis – former Chief Executive Officer of the mining company Xstrata plc from 2001 until its merger with Glencore in 2013. The Davis Foundation had a total expenditure of £2.2m in 2014/15 which equates to 2.95% of his estimated wealth. Grant recipients were not disclosed.

 

Other significant grants awarded by these new philanthropists in the last couple of years include £6m from The Dorothy & Spiro Latsis Benevolent Trust to Great Ormond Street Children’s Hospital and £1m to Boston Children’s Hospital (both in 2013 and hence excluded from this analysis of activity in the last financial year), £2m to the UBS Optimus Foundation by The Holroyd Foundation, £1m to the Royal Shakespeare Company by Lady Sainsbury’s Backstage Trust and £770,125 to  Clinton Health Access Initiative by the Surgo Foundation UK.

 

Notable names that have been less than generous with their charitable giving via their foundations to date include Michael Lemos (son of Greek shipping tycoon Constantinos Lemos) whose CML Family Foundation donated £3,406 which is 0.001% of his estimated wealth of £605m and Richard Higham (Group Chief Executive of Acteon Group Ltd) whose Higham Family Trust had an expenditure of just over £6,000 in 2014/15, which represents 0.004% of his estimated £150m wealth. Some of those whose trusts and foundations have shown no financial activity include former CEO of wealth management company Towry Andrew Fisher, Conservative Party donor and Domino’s Pizza franchise owner Moonpal Singh Grewal and Abhisheck Lodha, Managing Director of global real estate developer Lodha Group.

 

Of course there will be a number of possible reasons why these figures are so low – not all their charitable giving is directed through their foundation; this is not their primary foundation; the nature of their wealth means they do not have high levels of liquid assets; or they are still in the process of building up reserves.

 

It is this last point that is perhaps of most interest when we look at the figures. Whilst the total expenditure was only £26.17m in the last financial year, the total assets of the 79 trusts and foundations for which data was available was over five times this amount at £148.7m. 25 of these have assets in excess of £1m and 10 have assets in excess of £5m. This equates to an average of 0.62% of the philanthropists’ estimated wealth, with 15 building up assets of over 5% of their estimated wealth.

 

The foundation showing the largest asset amount is The Christie Foundation founded by Iain Abrahams, the former Executive Vice Chairman of Barclays Capital. The foundation has assets of over £21m for 2014/15 which represents over 40% of his estimated wealth, making him the also most generous benefactor. So far the only identified donation made by his foundation is of £150,000 to the Elton John Aids Foundation, of which he is also a Trustee.

 

What this shows is the considerable potential these trusts and foundations have for the sector. Whilst they may not yet be giving at a level in keeping with their vast wealth, these UHNWIs and HNWIs are ear-marking significant amounts of their wealth to be given away to charitable causes over the course of their lifetime and beyond, sustaining the charitable sector for years to come.

 

The financial data for these 104 trusts and foundations, along with the three Foundations of Wealth reports and all the past issues of New Trust Update dating back to 2005, is available online to NTU subscribers. If you want further information about New Trust Update and our searchable archive please contact Nicola Williams.

Trust Women

Why so few women in UK foundations?

We’ve analysed all of the newly created grant-making trusts (foundations) registered in England and Wales since 2005 – a data set of 2,312 new grant-makers. Our findings are in a new Factary report, ‘Trust Women’, available for download here.

Key Findings:

  • Boards are not balanced – on average there is just one woman per board across all of these trusts.
  • Almost one third (29.7%) had all-men boards when they were registered.
  • Just one trust in five has women in the majority on boards.
  • And we found some evidence that trusts with women in the majority were poorer at start-up than those with men-majority boards.

Our report is based on Factary’s New Trust Update dataset (http://factary.com/what-we-do/new-trust-update/ ).

To find out more about this data, contact research@factary.com

Download ‘Trust Women’ here.

Milan x 2

I have been to Milan twice this month. This is not just because I am a lover of Italy’s food, fashion and people (I am) but because both the Festival del Fundraising and the European Foundation Centre Conference were held in, or near, Milan.

This was like a Barcelona-Real Madrid match, with each team playing solo, two weeks apart. Two of the most significant stakeholder groups in the non-profit sector, the fundraisers and the philanthropists, each with their own view of how to change the world.

Amongst the differences there were common themes. Both sectors are growing. This year’s Festival del Fundraising was the largest ever, and the EFC Conference was a sell-out too. The rate of foundation growth is astonishing – two new German foundations are created each day, and we know from Factary’s New Trust Update that 214 new grant-makers were registered in 2014 in the UK. The same growth story emerged at EFC from all over Europe.

Both foundations and fundraisers are becoming more professional. Foundation staff are training at centres such as the Erasmus Centre for Strategic Philanthropy, while fundraisers are going to back to school at universities across the continent, including Italy’s University of Bologna, and the course I teach on, the Postgraduate Certificate in Fundraising at the University of Barcelona.

While both teams are training, there is a remarkable demographic similarity between them. Women lead both teams. The population at the Festival, and at EFC reflected this, whether we were talking about the all-women fundraising team at Save the Children in Rome or the Chair and key staff of Turkey’s Vehbi Koç Foundation. The future of our increasingly interconnected sector will be shaped by women.

Both conferences dealt with social change, in slightly different ways. At the Festival we heard about social change brought about by donations through non-profits. At the EFC we heard about social change through collaboration. Yes, collaboration. Not grant-making, or at least not centrally grant-making. An excellent workshop led by Nicky McIntyre of Mama Cash showed how Oak Foundation was focusing on changing the situation of women by collaborating with companies. Katharina Samara-Wickram from Oak Foundation described the organisation’s evolving Theory of Change. The foundation had initially focused all its women’s rights efforts on women’s rights organisations. But it had also commissioned research, from AWID amongst others, and had discovered that it might get more rights for its dollar (or Swiss Franc) if it instead worked on the millions of companies employing hundreds of millions of women around the globe. As a result Oak has developed an 8-point Business Case for women’s rights aimed at employers and using them as the vehicle for winning rights for women. This was one example amongst many of collaborations between foundations, NGOs and business to effect change in society.

I discussed this with a team from a leading UN organisation. The implications for fundraising are important, with the role of the fundraiser changing from being simply a grant-chaser to becoming the central relationship point for a complex web linking her own organisation with foundations, companies and other stakeholder groups.

The significant divergence between the two conferences came when we talked about investment. Fundraising team leaders in Italy complained about a lack of investment. Salaries in the sector are still modest and few organisations are willing to take the brave step of dramatically increasing investment in fundraising. By contrast the foundation sector spent a lot of time on investment, and appears to be ready to take on risk, so long as it has a social end. Thus the Italian majors, Fondazione Cariplo and Fondazione CRT both have programmes for investing their endowment in activities with a social as well as a financial purpose. There was some talk of divestment – with foundations encouraged to divest from the fossil fuel industry. But the bigger theme was Mission Related Investment. This was talked about across the EFC conference, with foundations making substantial investments in the social housing sector, and as venture philanthropy in social enterprises. Mission Related Investment opens up a substantial new line of funding for social purpose organisations – another challenge for traditional fundraising teams in Europe.

With only a little hindsight, both conferences felt like a revolution. Just ten years ago the Italian fundraising sector was tiny – a handful of visionaries in a few risk-ready organisations. At that time most European foundations were a closed shop – few published an annual report or had a website or could be induced to talk about their work. Their boards and management were older and dominated by men. Since then we have had a wave of transparency legislation running across Europe accompanied by a push for the same by the EFC itself – so now we can see what’s happening in foundations in Switzerland, the Netherlands and Spain (ironically, Italy remains somewhere behind the pack on transparency.) The feeling that a revolution is taking place in the sector ran through both conferences.

It is great to be living in revolutionary times.

The £6.8 billion Recipe for Philanthropy

There is a kitchen theme in this year’s Foundations of Wealth, published today, with Gordon Ramsay featured alongside the owner of the UK’s largest franchise for Domino’s Pizzas, and a kitchenware manufacturer.

They are three amongst 42 wealthy philanthropists who have set up a grant-making trust during 2014, all of them profiled in depth in our freshly-prepared report.

New trusts appear to be boys’ toys. 93% of the wealthy founders whom we profile are men, with just 7% women. That is the same ratio as in 2013, and slightly more male than in 2012. It reflects the gender imbalance in great wealth in the UK with around 10% of the Sunday Times Rich List being women, and a hard-to-explain gender imbalance in structured philanthropy. As “Untapped Potential” reported in 2011, just 4.8% of European foundation grant monies go to women and girls (see Shah, Seema, Lawrence T McGill, and Karen Weisblatt. Untapped Potential: European Foundation Funding for Women and Girls. New York: Foundation Center, 2011.) Factary is currently engaged in a study of philanthropy amongst women of wealth to try to find out why.

As in previous reports, the founders of UK grant-making trusts are economically active – more than two thirds (69%) are under 65 – a similar percentage to 2013 and a slightly younger profile than 2012, when 53% were under 65.

Their’s is new money – more than three quarters are self-made millionaires – with wealth principally from financial services, retail, manufacture and property. The total wealth represented by the 42 we have profiled in depth is over £6.8 billion – reflecting the increasing concentration of wealth in the UK.

The founders are distinctly international, with four people of Indian descent and three others with non-UK nationality, as well as founders who have lived and worked abroad. The UK is not the easiest country in the world in which to create a charitable foundation (it is arguably easier in the Netherlands, for example) but the combination of a wealth management industry that is growing and gearing up for philanthropy, a broadly stable economic climate and people – philanthropists – who want to make their giving more effective has led to a boom in the establishment of trusts. Last year we reported on 214 newly created grant-making trusts in our monthly New Trust Update report.

Could you build a partnership with these new trusts and foundations? Our report tells you about the founding philanthropists, about their philanthropy they set up their foundation, and about the new foundation’s interests. Health, welfare, education and training are the big subjects, and we’ve identified clusters of interests linking health and arts, education and welfare. We have researched an in-depth profile of each of these leading philanthropists, and here you will find biographic information that will help you build a link with the trust, or the founder.

Philanthropy is alive and well in the UK amongst people of wealth. These good 42 at least are willing to share their wealth with the rest of society.

New Frontiers of Philanthropy: A Review

New Frontiers of Philanthropy (Oxford University Press, 2014) is the Haynes manual for new philanthropists. With this book we can open up the engine of new philanthropy and check out the workings. With 653 pages plus an extensive bibliography it is a substantial volume covering the people and organisations involved in new forms of philanthropy, the tools that they are using, and key issues.

New Frontiers of Phil cover

Whether you are a fundraiser working with philanthropists or foundations, a researcher trying to understand philanthropy, the manager of a family foundation or a financial adviser you will find lots to interest you here.

The book has three main sections:

“New Actors” deals with new organisations in the philanthropy and social area. These new actors may be assembling capital, providing secondary markets or exchanges, or prospecting for new ventures, and Professor Lester Salamon makes clear in his introduction that many fundraisers are not considering our do not understand some of the key actors in finance, such as pension funds.

The section includes some terminology from the finance sector that we are going to have to get used to applying in the non-profit sector: “capital aggregators” for example are essentially fundraising organisations such as community foundations.

The increasing involvement of business in charitable activities is highlighted – and Rick Cohen contributes a chapter on corporate-originated charitable funds, such as the Fidelity Charitable Gift Fund with US$3.8bn in assets under management. These funds are growing faster, operating more efficiently, and selling more aggressively than their purely charitable counterparts, trends highlighted by Prof. Salamon who notes that commercial donor-directed funds are now larger than community foundations in the USA.

Because the book’s scope is so wide it includes entities that are on the margins between charity and business, or “impact-first” and “finance-first”. It includes a deal of material on businesses that are focusing on the “base of the pyramid” (the poor). For Prof. Salamon these are businesses that are meeting a social need; for me these are simply businesses dealing with a different market segment.

“New Tools” is an encyclopaedic description of the many different ways in which someone who wants to do social or environmental good might go about it. It covers loans, social impact bonds, socially responsible investment, new forms of grant making including prizes, crowdfunding… and more. Fundraisers and financial advisers should take the time to read this section because it will inspire both to try new products with their philanthropic customers.

The third section in the book, “Cross-Cutting Issues”, debates the issues that emerge from the new philanthropy including “the elusive quest for impact”. Dr Alex Nicholls and Rodney Schwartz send out a wake-up call to the fundraising community, with a chapter on the demand side of the social investment marketplace, saying that the challenge is “..not an insufficient supply of social investment capital but an insufficient supply of investment-ready deals.” (In plain fundraising speak: ‘there are lots of donors, but not enough well-prepared proposals’.)

In this section there is a thoughtful piece by Dr Maximilian Martin giving the global perspective on new philanthropy. Dr Martin challenges the conventional view, arguing that social capital markets are inefficiently relationship-driven, not value-driven. He is subtly signalling the limits of relationship fundraising, noting that “…nonprofit leaders typically spend vast amounts of time on fundraising rather than on the continuous improvement of the work of the organizations they lead.” [p.608] He creates the phrase “synthesized social businesses” to suggest that we should move from a world of small fragmented organisations to one in which we build larger business ventures with a social purpose. “A philanthropic foundation could acquire [control over] …a company with the mission to make the good or service available to as many people as possible around the world.”

If you want to understand what is happening out at philanthropy’s cutting edge, this is the book for you. No-one in the book is claiming that all our donors are going to be asking us about making a quasi equity investment in our social enterprise next week. But the evidence from the impact of the venture philanthropy movement in Europe is that these ideas are already circulating in a donor community that is looking for change.

Be prepared for the new philanthropy; read this book.

Factary and the new philanthropy
Factary has monitored and researched the new philanthropy for many years. We were the first research group to publish a report on venture philanthropy in the UK and we continue to monitor new developments. Contact Nicola Williams, nicolaw@factary.com or Chris Carnie, chris@factary.com if you would like to know more about our services in this area.

The Newest Philanthropists

Thirty of the UK’s newest philanthropists are featured in a report published today by Factary.

The report is focused on the Ultra High Net Worth Individuals (UHNWIs) and High Net Worth Individuals (HNWIs) who have founded grant-making trusts and foundations during 2013.

We profile 30 of the richest people in the country who have created grant-making bodies, and analyse their wealth, philanthropic interests and biographical information to create a picture of the UK newest philanthropists. With a combined estimated wealth of £5.7 billion, these individuals represent a significant source of funding for UK non-profit organisations in the years to come.

The report includes:

  • Detailed profiles of thirty new philanthropists
  • Updated information on their trusts and foundations
  • Note that, with one exception, none of these trusts is listed in any other directory of grant-making trusts
  • Our analysis of the biographic, philanthropic and financial data on these philanthropists
  • Networking Index to identify the links between philanthropists, companies and the new trusts.

HOW TO ORDER
To order the report email Nicola Williams, nicolaw@factary.com

The report is priced at £135. New or existing subscribers to Factary Phi or Factary’s New Trust Update get a discounted price of £95.

From Bookmaking to Billionaires
Included in the report is a scion of a billionaire family, a Duchess, a Viscount and two Knights of the Realm. There are eight representatives from the financial services industry including two hedge fund managers and four investment bankers, along with philanthropists with other sources of wealth including landownership, art galleries, bookmaking and football.

London, and International
There is a strong geographic concentration on London and the Home Counties but also a continuing international flavour to the new philanthropists in the UK with seven of the thirty UHNWIs and HNWIs having nationalities other than British, and global connections identified to a wide range of countries including Zambia, South Africa, Italy, Nigeria and St Vincent and the Grenadines.

Oxbridge
There is a strong Oxbridge connection – a third of these new philanthropists went to either Oxford or Cambridge, with over 25% going to Oxford. Other UK universities attended include the University of Bristol, the London School of Economics, Leeds University and the University of Birmingham. Three of the people featured also went to the same public school; Charterhouse.

UK Philanthropy, Goes on Growing
During 2013 Factary’s New Trust Update reported on a total of 217 newly-registered grant-making trusts and foundations in the UK. This report shows that people of significant wealth are continuing to create foundations and grant-making trusts to support philanthropic organisations in the UK and abroad, creating a positive picture of philanthropy in the UK.

Venture Philanthropy in the UK Shows Similar Characteristics
The findings in this new report reflect the new philanthropists that we identified in our 2013 report on The Venture Philanthropists. In that report we found that 39% of UK venture philanthropists come from the financial services industry. We also found many people of wealth – £38 billion in combined personal assets.

Research:
This report was researched and edited by Will Whitefield, Senior Researcher at Factary. It is published as a special supplement to Factary’s New Trust Update.