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Leaders of time-limited foundations often assert that spending all of their resources in a relatively short period gives them the ability to do more good, to produce more social value, than if they were to hold the same resources in a lasting endowment and disburse only the proceeds. That belief has motivated many signatories of the Giving Pledge, including the founder of The Atlantic Philanthropies, Chuck Feeney. The idea has an intuitive appeal, and perhaps as a result, it is rarely questioned. But examined more closely, it may lead one to wonder: How would we know whether, or when, this is true?
At heart, the proposition is essentially financial — a matter of comparing investments. As an Atlantic investment adviser put it, if a foundation’s grants “generate a social return, and that return compounds at a higher rate than your financial assets would,” then making the grants soon is more socially valuable than preserving the capital and making more grants later. At a gathering at Atlantic in 2016, a group of philanthropic leaders, advisers, and scholars examined the financial and economic logic of this question in some detail. Their deliberations were largely theoretical, but many participants felt the question might be just as well answered by applying the broad logic of investment returns to some real-world foundation programs. The pages that follow offer three such examples.
Authored by Tony Proscio