Economic & Philanthropic Trends Watch

Big Squeeze on Ivy Leagues

2009-06-30T08:38:00.001-05:00

The alternative assets that enriched big Ivy League endowments are now causing outsized headaches for Harvard, Yale, and Princeton. Time to go back to school and get back to stocks?

Full-text article by Andrew Bary is available via Barron's, 6.29.09. [Free registration required.]

Wall Street in Broad Sell-Off

2009-06-16T08:32:00.001-05:00

Investors took cover as they faced the prospect that any economic recovery could be slow and halting.

Full-text article by Jack Healy is available via The New York Times, 6.16.09.

Where the Recovery Will Bloom First

2009-06-12T09:15:00.001-05:00

When the economic recovery finally comes, some cities will bounce back faster than others, and real estate prices and the prevalence of technology jobs will be key factors, Joshua Zumbrun writes. Based on that criteria, he suggests some Texas cities will recover quickly, along with places such as Boulder, Colo., and Huntsville, Ala. Detroit and other heavily industrialized cities will continue to lag, he argues, as will financial centers such as New York.

Full-text article by Joshua Zumbrun is available via Forbes, 6.10.09.

Rising Stars of Venture Capital

2009-06-11T08:30:00.001-05:00

Venture capitalists say the best startups can emerge in tough economic times because these companies know how to operate efficiently. This Wall Street Journal blog post looks at several companies that emerged just after "Black Week" last year, when the Dow Jones Industrial Average experienced its worst-ever weekly drop.

Full-text blog post is available via The Wall Street Journal/Venture Capital Dispatch Blog, 6.8.09.

Wider Confidence Lifts Economy From Winter's Deep, Dark Freeze

2009-05-21T16:51:00.001-05:00

The financial system, frozen solid for the past nine months, is in a spring thaw. And it's happening even though many of the Obama administration's major rescue programs have yet to get off the ground.

Full-text article by Neil Irwin and David Cho is available via The Washington Post, 5.21.09.

Green Shoots Emerge

2009-05-15T17:03:00.001-05:00

With global markets sending hopeful signs and recovery claims abounding, there could be light at the end of the tunnel.

Full-text article by Chris Giles, et al. is available via The Financial Times, 5.11.09. [Free registration required.]

The Future of Private Equity

2009-05-11T16:06:00.002-05:00

With credit markets constrained and a shift away from a business culture built on highly leveraged portfolios, it may seem hard to be optimistic about the future of private-equity firms. But private equity’s past success hasn’t resulted solely from leverage but rather from its culture of active ownership, its adaptability, and its ability to summon financial and human resources. In today’s difficult economic environment, those strengths are more important than ever.

Full-text article by Conor Kehoe and Robert N. Palter is available via The McKinsey Quarterly, April 2009. [Subscription required.]

Recession or Depression?

2009-05-07T09:20:00.001-05:00

Data from the Bureau of Labor Statistics show that the recession is looking much like the recession of 1981, which was relatively deep and short, points out Jeff Cornwall of the Center for Entrepreneurship. Better yet, when graphed against the Great Depression, the current downturn barely registers as a blip.

Full-text blog post by Jeff Cornwall is available via The Entrepreneurial Mind, 5.4.09.

No End in Sight to Job Losses; 663,000 More Cut in March

2009-04-03T18:33:00.002-05:00

The American economy surrendered 663,000 more jobs in March as the unemployment rate surged to 8.5 percent, its highest level since 1983, the government reported Friday.

The latest snapshot of accelerating decline in the national job market lifted to 5.1 million the number of jobs lost since the recession began in December 2007. More than two million jobs have disappeared over the first three months alone.

The full-text article by Peter S. Goodman and Jack Healy is available at The New York Times, 4.3.2009.

The Forgotten Rich

2009-04-02T07:37:00.001-05:00

The Senate budget debate began this week against a backdrop of war and recession, rising unemployment and surging foreclosures, runaway health care costs and diminishing insurance coverage — to name just a few of the nation’s big problems. But for Senator Blanche Lincoln, Democrat of Arkansas, and Senator Jon Kyl, Republican of Arizona, the most pressing issue is clear: America’s wealthiest families need help. Now.

The two senators plan to propose an amendment to deeply cut estate taxes for the fraction of the top 1 percent of the population still subject to those levies.

The proverbial millionaires next door — the plumbers, contractors and accountants who amass substantial wealth through hard work and modest living — are not the intended beneficiaries of the proposed cut. The Obama budget already takes care of them, because it retains today’s law, which imposes the estate tax only on couples with property worth more than $7 million, or individuals with property worth more than $3.5 million. That means 99.8 percent of estates will never — ever — pay a penny of estate tax.

The full-text of this editorial is available at The New York Times, 4.1.2009.

Private-Equity Fund-Raising: It Is Like 2003 All Over Again

2009-04-02T07:26:00.002-05:00

Private-equity fund-raising in the first three months of the year dropped to its lowest level in more than five years, while the number of buyout firms abandoning plans to raise fresh capital is slowly on the rise, according to new research, as investor appetite begins to mirror the flagging deal market.

A total of $45.9 billion was raised for the final closes of 71 private-equity funds in the first quarter, according to industry data provider Private Equity Intelligence. This is the lowest quarterly figure since the final three months of 2003, when $34 billion was raised. Roughly $125 billion was raised in the fourth quarter of 2008.

Funds focused on the U.S. were the most popular, with $23 billion raised across 39 funds, making them the biggest group in terms of both number and value. Seventeen European funds attracted $20.2 billion, while the same amount targeting investments in Asia and the rest of the world raised $2.7 billion.

The full text of this blog entry by Oliver Smiddy, of Financial News, is available at the Wall Street Journal's blog, Deal Journal, 4.1.2009.

Even Fewer Profits for Venture Capitalists

2009-04-02T07:13:00.003-05:00

The bad news for venture capitalists continues, especially when it comes to delivering profits.

Venture capitalists — who invest in private companies with the aim of profiting later when those startups get sold or go public — have seen the businesses of their portfolio companies suffer in the recession, their fund-raising get hurt by the gyrating stock markets, and have experienced a big hit to their profits. That’s because IPOs and mergers and acquisitions of startups have been scant.

The first quarter of 2009 was particularly horrible in this regard. According to new data out Wednesday, not a single venture-backed company went public in the three months that ended Tuesday. In fact, no venture-backed company has gone public in the last eight months as the market has see-sawed.

M&A exits fared just a little better, according to VentureSource, a research firm owned by News Corp., which also publishes The Wall Street Journal. Just 68 venture-backed companies were involved in an M&A event in the first quarter, generating $3.2 billion. That’s down 65% from $9.1 billion produced a year earlier and is the lowest quarterly total since 2003.

The full-text of this blog entry by Pui-wing Tam is available at the Wall Street Journal's Blog - Digit: Technology News and Insights, 4.1.2009.

Special Report: The World's Billionaires

2009-04-01T01:42:00.001-05:00

The richest people in the world have gotten poorer, just like the rest of us. This year the world's billionaires have an average net worth of $3 billion, down 23% in 12 months. The world now has 793 billionaires, down from 1,125 a year ago. After slipping in recent years, the U.S. is regaining its dominance as a repository of wealth.

Americans account for 44% of the money and 45% of the list's slots, up seven and three percentage points from last year, respectively. Bill Gates lost $18 billion but regained his title as the world's richest man. Warren Buffett, last year's No. 1, saw his fortune decline $25 billion as shares of Berkshire Hathaway fell nearly 50% in 12 months. Mexican telecom titan Carlos Slim Helú maintains his spot in the top three but lost $25 billion.

The full-text article by Luisa Kroll, Matthew Miller and Tatiana Serafin is available at Forbes Magazine, 3.11.2009.

Special Report: 48 Heroes Of Philanthropy

2009-04-01T01:32:00.002-05:00

They're making generous, sometimes innovative, contributions in Asia and elsewhere.

The global financial crisis is hammering fortunes all over Asia, but the past year was still a good one for philanthropy as tycoons and more modest donors tried to maintain their charity commitments. Many opened up their checkbooks to help the victims of the Sichuan earthquake and the Myanmar cyclone in May. Many more donated to health, education, cultural and other causes.

The full-text article by John Koppisch is available at Forbes Magazine, 3.4.2009.

Creative Giving: Extreme Fundraising

2009-04-01T01:28:00.002-05:00

Endurance sports, personal blogs and personal (often disease related) charities have merged into a new form of extreme fundraising. Dance-a-thons and charity auctions are too tame. These athletes pedal across continents and row across oceans for a cause.

Both charities and for-profit software companies such as Blackbaud (nasdaq: BLKB - news - people ) and Active Network are capitalizing on the trend, offering ready-made personal fundraising sites with blogs, payment capability and more. Blackbaud estimates online fundraising has hauled in $3 billion in donations worldwide over the past seven years, with the pace accelerating over the past year.

The full-text article by Steven Bertoni is available at Forbes Magazine, 3.25.2009.

Foundation Giving in ’08 Defied Huge Asset Decline

2009-03-31T23:08:00.004-05:00

The nation’s foundations lost nearly $150 billion in assets last year, or almost as much as they have given away over the last four years, a new study has found.

The study, by the Foundation Center, a chief authority on American philanthropy, determined that foundation giving for the year nonetheless held steady at an estimated $45.6 billion, falling by just 1 percent on an inflation-adjusted basis.

Still, without the $2.8 billion given away by the Bill and Melinda Gates Foundation, the nation’s largest, the decline would have been almost 3 percent. Moreover, the center cautioned that because the steep loss of asset value happened so late in 2008, giving in the current year was likely to drop much more.

The full-text article by Stephanie Strom is available from The New York Times, 3.31.2009.

Giving and Taxes

2009-03-27T17:05:00.000-05:00

Evidently, the rich still carry influence in Washington. President Obama’s plan to cap itemized deductions for high-income taxpayers at a 28 percent rate flew like a lead balloon in Congress, reportedly sending the White House in search for other sources of revenue.

It would be a pity if the administration were to forgo that money — some $320 billion over the next 10 years to finance a good share of its proposed health care reform. The money is needed. And the complaints that capping deductions would kill charity, decimate small business and put yet another nail in the coffin of the housing industry are wrong.

The full-text editorial is available via The New York Times, 3.19.2009.

Senate Measure Seeks to Spur Foundations to Give More

2009-03-27T16:56:00.003-05:00

Three senators introduced legislation Tuesday intended to encourage foundations to give away more of their money.

The measure would change the way foundations are taxed on their investment income, replacing the current two-tiered system with a single tax rate. Foundations complain that the current system effectively penalizes them when they give away more money than usual.

“The need for philanthropy is greater than ever in this weakened economy, and we should be encouraging foundations to increase their charitable giving,” said Senator Charles E. Schumer, the New York Democrat who is sponsoring the bill along with Senators Debbie Stabenow and Carl Levin, Democrats of Michigan.

Under current law, private foundations must make grants and other expenditures for charitable purposes equal to at least 5 percent of the market value of their assets. In calculating that payout rate, foundations are allowed to include the 2 percent excise tax they generally pay on their investment income.

The full-text article by Stephanie Strom is available via The New York Times, 3.24.2009.

Financial Safety Net of Nonprofit Organizations Is Fraying, Survey Finds

2009-03-27T16:43:00.003-05:00

The financial health of the nation’s nonprofit groups is rapidly deteriorating, according to a survey of some 900 nonprofit leaders around the country.

Only 12 percent of those organizations expect to end the year with an operating surplus, compared with 40 percent who ended their most recent fiscal years with money on hand, according to the survey by the Nonprofit Finance Fund, a charity that provides loans and other financial services to nonprofit groups.

The full text of this article by Stephanie Strom is available via The New York Times, 3.25.2009.

Letter: In Tough Times, Foundations Must Keep Giving

2008-12-10T15:06:00.001-06:00

" “Bracing for Lean Times Ahead” (Giving section, Nov. 11) highlights the critical role philanthropy plays in times of economic crisis.

I agree, and believe that foundations should maintain, even increase, their giving in difficult economic times. The issues the MacArthur Foundation confronts at home and abroad — human rights, conservation and affordable housing preservation, among others — grow more, not less, urgent when the global economy is in recession."

Full-text of letter is available via the New York Times, 11.18.08.

Bracing For Lean Times Ahead

2008-12-10T15:03:00.001-06:00

Given the financial tremors that have obliterated wealth and driven the economy deep into the doldrums, will charitable giving, which reached record levels in the United States over the past decade, show sharp declines? Will foundations, faced with shrunken endowments, scale back their grant-making? Will individual charities, squeezed by reductions in both private and public money, be forced to cut programs?

Full-text article by Stephanie Strom is available via the New York Times, 11.10.08.

As The Economy Declines, Donors Rethink Estate Plans

2008-12-01T14:27:00.002-06:00

For donors, a crucial question has always been how much to give to charity while alive and what to leave in an estate plan. The current economic crisis is causing many people to rethink their original answer.

Full-text article by Deborah L. Jacobs is available via the New York Times, 11.10.08.

Colleges Are Not Going Hungry, But Are In Need

2008-12-01T14:25:00.002-06:00

In a more normal year, the alumni fund-raising plea that turns up in the mail right about now seems perfectly in tune as the day for thanks gives way to a month of giving.

But this year is different. Huge numbers of people have lost their homes to foreclosure. Unemployment is on the rise. And a good chunk of the United States automobile industry could wither away within months, taking hundreds of thousands of middle-class jobs with it.

Full-text article by Ron Lieber is available via the New York Times, 11.28.08.

Private Schools Say They’re Thriving In Downturn

2008-12-01T14:23:00.002-06:00

Private schools across New York City say they are thriving this fall, with record numbers of applicants and no significant decline in donations. Yet almost daily, even brand-name schools are finding that they have to reassure jittery parents about shrinking endowments and dispel rumors that requests for financial aid are pouring in, and that economically squeezed families are pulling their children out and enrolling them in public schools.

Full-text article by Winnie Hu and Alison Leigh Cowan is available via the New York Times, 11.28.08.

Beyond The Ivied Halls, Endowments Suffer

2008-12-01T14:18:00.003-06:00

Some of the nation’s universities are trying to sell chunks of their portfolios privately as their endowments swoon with the markets.

Among institutional investors, school endowments aggressively embraced private equity, real estate partnerships, venture capital, commodities, hedge funds and other so-called alternative investments over the last few years. Endowments with more than $1 billion in assets reported 35 percent of their holdings in these types of investments on average last year, a much greater portion than big public pension funds, for example.

Now they are balking. The value of some of these investments has fallen, and they are not easily shed because there is no public market for them, as there is for stocks. Worse, private equity and venture capital funds require investors to put up additional capital over time. Cash may now be in short supply at schools facing budget pressures and investment losses.

Full-text article by Claire Cain Miller and Geraldine Fabrikant is available via the New York Times, 11.25.08.