Permanent giving for endowment purposes - our expectations for the future and suggestions for success

Permanent giving for unrestricted purposes, or the holy grail of endowments for those who solicit has become an almost distant memory in our world.  Jewish donors give on a completely unrestricted basis almost solely in their estate plans and when they have not had the benefit of counsel.  The Annual campaign of the system has no more than 1-2% invested and permanently on the shelf.  In addition there may be several billion dollars in pipeline commitments through our PACE, LOJE, and Create a Jewish Legacy (CJL) programs.  CJL, our most recent and proudest achievement encourages legacy participation, but does little on a national basis to help the donor focus, preferring to encourage local donor centered philanthropy, another holy grail of our movement.  Local communities have their own spin on how to speak to donors about these issues, having in many cases involved agencies and even synagogues in the planning and execution of the program (read about the Harold Grinspoon Foundation’s Life and Legacy program). 

We know that legacy giving is the most important way to guarantee a future cash stream to our communities.  Donor advised fund assets tend to expire with the first generation, (although hard data on this topic is anecdotal at best).  What should be our expectation of endowment giving as we look at the next 5 to 10 year period?

-First, even if we do little the system’s resources in this area will likely continue to grow and produce 30 percent of the national campaign in the next 5-8 years.  Every investment and philanthropy publication (see Giving USA 2014 as an excellent example, the Chronicle of Philanthropy etc.)  predicts the continued growth of donor advised fund programs and touts them as a major generator of new philanthropy.  Unfortunately, the system struggles to find the resources to install or upgrade endowment and donor advised fund technology to compete with the many financial firms dedicated to managing the substantial resources already on hand.   The potential of a unified national approach to  technology which both Jewish federations and community foundations could share is as yet an unrealized goal.  Each community continues to do this on its own.  And even though we lag the creation rate of Jewish private foundations substantially  (see attached chart on Jewish private foundations and endowment funds), donors still give for many reasons, including commitment to the mission and values of the movement, tax policy which still encourages philanthropy and the customer service provided by staff members in local communities.

-Second, communities with the capacity to focus and provide resources should strongly invest in personnel to grow endowed giving.  Our market penetration is still very low in the permanent fund area, and while not every donor is willing to endow his/her annual campaign gift, donors understand the request which is being made of them.  It is estimated that 65 billion is held by North American Jewish private foundations many of which make substantial gifts to the Annual campaign! 

-Third, communities with more limited resources need to continue to integrate their fund development efforts in order to ensure that donors are exposed to more than one request and to project a more complex picture of resource development capacity.  Staffs need to be trained to be able to focus beyond the annual campaign.  Agency executives need to be pulled in to help.  Federations and Jewish community foundations need to work as closely as possible to maximize local resources and receipts.  In a period of 10 years, the donor base will have morphed significantly and our solicitation and education efforts will have to evolve accordingly.   In addition and crucially, the annual campaign must have a more equal partner in the endowment department or the Jewish community foundation down the hall or in the next building.   

-Fourth, Multi generational family philanthropy, which JFNA has attempted to trumpet with the help of special funding and resources from the Andrea and Charles Bronfman Philanthropies will become a way of life as we attempt to bring on board the next generation of our most generous families.  Losing this opportunity could have a significant down side impact on our system.  In many cases federations and community foundations are suffering from a surprising lack of information on who even encompasses the next generation in a given community.

-Fifth, investment management, the penultimate insider business of federation endowments faces a crucial decision.  Will the lay and professional leaders responsible for this singularly important function see it in our interest to pool endowment resources much more effectively, thus lowering fees and increasing returns?   Asset growth through prudently aggressive investment management could substantially increase the resources available to carry out our mission.

Accepting these challenges in the short term will almost assuredly take our invested assets from $14 to 20 billion and beyond in a 5 to 8 year period.  The resources exist, in the area of governance, financial management and even development expertise to fulfill our potential and take the movement to its next level, perhaps even changing the focus from transactional to permanent philanthropy,  if only we can summon the determination to invest accordingly!

So here are some suggestions from the playbook of the more sophisticated endowment developer.  Do an audit and see whether you are taking the time or trouble to implement them in your campaign.

1.    Analyze or do an inventory of your major gifts and corresponding endowment realities line by line.  Where are you?  How do the numbers relate to future needs of the community?

2.    Based on the analysis and needs create objectives – what needs to be done to accomplish these objectives?

3.    Have the Board and Executive committee ratify the objectives and plan with a commensurate allocation of resources.

4.    Create plans for each major donor.  Build an information base.  Where are the donors in terms of your objectives?  Who is going to visit with each?

5.    Visit each donor.  Present the case but more importantly listen to their needs.  What are their interests?  How does family philanthropy and the interplay of the next generation’s needs and interests interact?  How is each family giving on a technical basis – private foundation, donor advised fund, supporting foundation of a public charity?

6.    Revisit each donor’s plan.  Based on their needs, interests, technical realities build an ask – endowing a gift to your annual campaign, endowing a gift with a contract between you, the private foundation or donor advised fund, endowing an agency or thematic gift based on interests, etc.

7.    Ask – based on results rework the plan, timing, or begin stewardship of the gift.

8.    Analyze results versus objectives at milestone points.

9.    Repeat over and over – securing the future needs of your community is a never ending project!


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Growing the capacity of endowment development to meet needs in the Jewish Federation system

This is part one of a two part article. Part I: Background information deals with the Federations efforts to grow endowments and focuses on donor advised funds. Part II will deal with permanent endowments funds and suggestions for growth. These principles apply to all charities seeking to grow funds of this type.

In 2013 the JFNA’s annual endowment survey reported that total assets under management in the 151 federated communities was approximately 16 billion dollars.  Those same entities distributed 1.4 billion in grants in that year.  2014 data should be published later this year after JFNA reexamines the way in which it collects and reports the information. 

Endowment development in the Jewish federation system is the product of a long and distinguished history and has been one of the most productive philanthropic revenue streams for the Jewish community.  It is also a stream with significant unrealized potential, and one of the least understood.  Indeed, endowment contributions in 2013 amounted to $1.6 billion, a figure that continues to eclipse the collective total raised in the annual campaign by almost 67 percent.  As someone with a 30 plus year career in federation endowments both locally and nationally I feel a responsibility to remind leadership which is deeply concerned about the growth of our capacity to serve constituencies spread across the globe about the opportunities to be realized from continued endowment growth.

As many are aware, the biggest opportunity is the increasing participation in and growth of assets in donor advised funds which have been a trademark of Jewish federation endowments for over 40 years.   In 2013, donor advised were prevalent in over one half of the Jewish federations, and comprised almost $5 billion or 30 percent of the collective endowment assets.  80% of the 1.4 billion in grants originates from donor advised funds.   Almost 60% of that amount originates from donor advised funds.  These funds not permanent endowments but essentially philanthropic accounts which allow a donor or family to participate in giving and with the collaboration of federation (in this case) distribute all or more than the income generated.  They have been treated as endowments by our system for reporting purposes with our permanent funds but have significant differences in operation and mission.  During my last year on the job we determined to change the branding of our 2014 Annual Endowment survey to recognize this crucial difference. 

 When a former JFNA National Annual Campaign chair asked me “So what are we doing with all this money (alluding to the billions invested by our system )?” I had to remind him about the true nature of our asset base, the positive side of which is that grants from the donor advised funds make up approximately 20% of our Annual campaign revenue, although some communities informally report up to 30 or even 50% of their annual campaign contributions coming from this source (and various supporting organizations held within the system as well).  I call this complex revenue stream which emerges from the donor advised funds a virtual endowment for the system

Jewish federation endowments have a bifurcated asset base – the donor advised funds and all of the remaining types of permanent funds which have been contributed by generous donors since the turn of the last century.  While the federation system would treasure an endowment allocation like that of many universities (with substantially more permanent funds) in reality when it comes to endowment we are faced with a situation in which the vast bulk of these assets can only be termed “semi permanent” or even transitory.  The most important permanent endowment in the federation  system which we have tried to build over a period of over 20 years, the Permanent Annual Campaign endowment (PACE) has been marginally successful, serving to attract largely older donors, or those with a deeply engrained commitment to unrestricted giving to the annual campaign.  Every recent piece on giving over many years points to the desire by the younger generation to give with a focus (see recent publications from the Johnson Center at Grand Valley State University at and 21/64 formerly of the Bronfman Philanthropies).  Women’s giving for endowment purposes in the system is focused on the Lion of Judah Endowment (LOJE), a highly marketed and successful form of giving which has tended to be topped out at $100,000 per donor because of the unique dynamics of giving and leadership in the system, which chose in the early years of the program to encourage endowing a gift of $100,000 rather than the entire (and frequently much larger) gift to the annual campaign.  Both PACE and LOJE focus on the totality of the annual campaign and therefore require a donor who is confident and desirous of supporting the mission and vision of the entire annual campaign as opposed to a particular project or activity.

Given the nature of our donor base and fund development in the system it should be no surprise that we have major communities with only 1% of their annual campaigns endowed but very large supporting  organizations pouring enormous sums into charitable activity of infinite variety but focusing in many other places beside the Annual campaign. 

In the next piece we will focus harder on permanent giving rather than donor advised funds and some expectations for endowment development and its impact on federation capacity to meet needs and some development suggestions for the professional.


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