Updated with correction
Catholic archdioceses and dioceses across the country have set up 143 legally separate foundations whose combined assets total $4.6 billion, a fast-growing group of asset owners, many of them with little transparency, underserved and ripe for outreach for investment management services, said Walter J. Dillingham, who researched the market.
Mr. Dillingham, managing director, endowments and foundations, Wilmington Trust N.A., New York, recently completed research that put together what he believes is the first comprehensive count of the foundations and tally of their assets in a report, “The Advancement of Religious-Based Fundraising Foundations in the United States: An analysis of fundraising endowment management and governance disclosure practices of Catholic foundations.”
The $280 million Catholic Community Foundation of Minnesota in the Archdiocese of St. Paul and Minneapolis is the largest in the report, said Mr. Dillingham.
Catholic Education Foundation of Los Angeles ranks second, with $180 million, followed by Catholic Community Foundation Inc. in the Archdiocese of Indianapolis, $173 million; the Catholic Foundation of Dallas in the Dallas Diocese, $163 million; and the Catholic Community Foundation in the Archdiocese of Miami, $157 million.
In all, the foundations in the report have a mean size is $33.6 million, while their median size is $16.6 million. Some 30 of the foundations have more than $30 million in assets each. The foundations are “growing very rapidly,” Mr. Dillingham said, noting for example the Catholic Community Foundation of Minnesota grew 26.2% in its fiscal year ended June 30, 2014, the latest data available.
For the 74 foundations on which he could obtain such data, the average growth one-year rate was 21% for their latest fiscal year, including donations, Mr. Dillingham said.
In growth and in term of investment and governance structures, “these foundations are evolving,” Mr. Dillingham said.
Of investment management models used by 68 of the separate foundations that Mr. Dillingham was able to get such detail, 25 use outsourced CIO, delegating discretion for allocation and investment management implementation, 24 used investment consultants to assist with allocation and manager selection, 12 use a single balanced investment manager, four use multiple balanced managers; two delegate asset management to a local community foundation; and one uses internally selected set of passively managed mutual funds.
Because of the lack of transparency, asset allocations of the foundations individually or in aggregate for the group was unavailable, Mr. Dillingham said. Twenty of the foundations used alternative investments, mostly hedge funds.
Some 38% of the foundations disclose nothing publicly, although Mr. Dillingham said he reached out to each one and was able to obtain at least some information about their assets.
“There is a trend to more transparency,” Mr. Dillingham said.
In all, 35 of the foundations file voluntarily file 990 form disclosures about their assets and activities with the Internal Revenue Services, even though as religious affiliates they are exempt from doing so, Mr. Dillingham said.
The separate foundations are growing through fundraising campaigns as well as investments and hiring staff, he said.
Some 68% of the foundations were formed since 1990 and 90% since 1980, the report found.
Donors often prefer to give to separate foundations, administered independent of the church and “may be protected from any church-related litigation,” the report said. Among other reasons, the separation “enables trustees to be focused on fundraising, rather than the operations and hierarchy of the diocese,” the report said.
Some archdioceses and dioceses have foundations that are bigger and smaller in terms of assets than the foundations in the report, but they are controlled by the church administration, Mr. Dillingham said. Newly raised funds tend to go into the separate foundations, he said.
The separate “foundations are in need of overall advice on asset allocation and (investment) trends with the market being so volatile” and how to reach spending and asset growth goals “after inflation and with future (expected) returns not looking attractive,” Mr. Dillingham said.
They want expertise to help with benchmarking, governance and fiduciary responsibility, as well as trends in allocation and investment approaches among peer foundations, he added.
“At this point we are initiating conversations” with the foundations about money management, Mr. Dillingham said.
Wilmington Trust manages money for about a half-dozen faith-based foundations, including some among the funds in the report, Mr. Dillingham said, saying no further details were available. “It's really an area of great growth and focus.”
The report is available below:
