🔒Shaky stock market doesn’t deter Hartford Foundation from record grant-making year

Amid last year’s economic uncertainty — caused by inflation, supply chain issues, workforce shortages and a poor-performing stock market — one might assume charitable giving took a hit.

That wasn’t necessarily true. In fact, 74% of the 215 private foundations recently surveyed by Fairfield-based consultancy Foundation Source said they maintained their grant-making in 2022 despite a difficult economic environment.

And for those foundations that made changes to their activities, most increased the size and number of grants, the survey found.

That was the case with the Hartford Foundation for Public Giving, which recently announced it handed out a record $54.5 million in grants last year, breaking its previous $52.7-million record set during the peak of the COVID-19 pandemic in 2020.

It also raised $40.8 million in donations — the largest sum in more than two decades — from individuals, families and other groups that collectively opened 41 new funds.

Hartford Foundation President and CEO Jay Williams said several factors led to last year’s growth in grants and fundraising, including an increase in corporate donations fueled by a major Hartford employer.

He declined to provide further details but said more news would be shared in the future.

The foundation also established a new individually managed account program that allows donors to maintain use of their own financial advisor, while leveraging the foundation’s grant-making services.

Traditionally, donors provide funds directly to the foundation, which manages and invests the assets in addition to assisting with grant-making.

The new program led to about $5 million in new commitments, Williams said.

In terms of grant-making, $54.5 million went to 579 student scholarships and 1,126 nonprofits that have a connection to the foundation’s core strategic focus areas, including efforts to:

• Increase the number of Hartford residents living in “higher opportunity neighborhoods”;
• Provide for residents’ basic human needs;
• Increase education and employment opportunities for residents of color — including youth and the formerly incarcerated;
• Increase civic and resident engagement; and
• Increase equity and inclusion in the arts sector.

Two of the larger commitments included an 18-month, $2.25 million grant to Hartford-based social services nonprofit The Village for Families & Children Inc., to support its behavioral health, early childhood and youth development programs; and $1 million over 18 months to Catholic Charities to support its efforts to help families improve their employment prospects, including a new entrepreneur microloan program.

Perhaps the foundation’s biggest headwind in 2022 was riding out the stock market — key to any foundation that oversees and invests donor assets.

All three of the major U.S. indices last year recorded their worst annual performance since the 2008 financial crisis, with the Dow Jones down about 8.8%, S&P 500 declining 19.4%, and the Nasdaq down 33.1%.

The foundation said it ended 2022 with about $1 billion in assets, down from approximately $1.25 billion reported at the end of 2021.

The decline, however, didn’t stop the increased grant-making, Williams said, because the foundation calculates its spending policy — or how much money it doles out annually in grants — based on the longer-term performance of its two investment funds.

The foundation annually spends about 5% of the market value of the funds. The market values are calculated based on a trailing 20-quarter average.

“That smoothes out our ability to make grants,” said Williams, a former mayor of Youngstown, Ohio, who served in the Obama administration as assistant secretary of commerce for economic development. “So, although you had a down year in 2022, you had five total years of performance that you take into account. We want to maintain the average because in a down year, you won’t see our grants,” decline significantly.

Williams said the foundation’s overall strategy is to “invest to exist in perpetuity” and its staff, consultants and investment advisory committee target an annual return that equals 5% plus a long-term consideration of the Consumer Price Index.

That ensures the foundation’s spending power isn’t eroded by inflation and also accounts for its annual grant-making target.

“It isn’t glamorous or sexy, we’re not out chasing the highest returns,” Williams said. “But nor can we say ‘let’s tuck these resources in (treasury) bills and go about our business.’ We have to have an investment strategy that not only allows us to grant money today, but seeks to preserve the spending power for future generations.”

Here’s what else Williams had to say:

The individually managed account program seems like a unique offering. What led the foundation to adopt it?

A. We recognize that there are donors who want to make significant philanthropic contributions through the foundation, but really want to be able to maintain their financial management team.

Previous to last year we did not allow that, but we want to be responsive to the interests of donors.

Now we offer it to those who are considering significant philanthropic activity through the foundation.

Did the increase in donations last year directly correlate with the increased grant-making?

A. Yes, that contributed to it. But we are also seeing a trend in philanthropy where donors are much more inclined to want to see their donations go out into the community in a much shorter period of time.

Based on our spending policy, you would expect donors to grant about 5% of their money each year. But some newer donors are saying ‘this year I want to do 15% or 20%’ and we’re saying that’s fine.

This is a trend that’s happening across the industry, not just at the Hartford Foundation.

How’s it determined which organizations are grant beneficiaries?

A. You basically have two different strategies.

You have the donor advised fund, where the donor — or a family member or other designated advisor — really directs where those grants go. It’s usually aligned with the work the foundation is already doing.

Then there is the discretionary funding. We are fortunate that the Hartford Foundation has one of the highest amounts of discretionary funding of any community foundation in the country.

Almost 60% of our resources are discretionary, whereby the donor has said ‘here are the resources, I am entrusting and designating the Hartford Foundation and its discretion to make the grants as to what it thinks is in the best interest of the community.’

So, in that regard, that’s where we are working very closely with the board, outside stakeholders and partners, and the expertise of the staff to engage nonprofit organizations consistent with the priorities of the foundation.

One of the foundation’s top priorities is to increase the number of Hartford residents living in higher opportunity neighborhoods within and outside Hartford. What does that mean?

A. At its core, higher opportunity neighborhoods are the types of neighborhoods that you or I, or any citizen would aspire to live in that has quality affordable housing, a reasonable expectation of safety, amenities — whether it’s a small business or a coffee shop — and access to transportation to school, among other things.

That could be a neighborhood in Hartford or outside Hartford.

One of the challenges that the state has outside of Hartford, is that there aren’t always pathways or welcome mats in other communities with respect to affordable housing. There’s the stigma and the barriers that exist that are rooted in some of the challenges and issues of the past.

Why shouldn’t someone who happens to live in Hartford have an opportunity to live in another part of this region?

How are you supporting this effort?

A. We support this several ways including through grants to Desegregate Connecticut and the Open Communities Alliance, which are organizations that are working to ensure that these barriers to affordable housing are challenged and mitigated.

We are also working with the city of Hartford and other local organizations to make sure there are neighborhoods of choice within Hartford.

(For example, the foundation last year provided more than $225,000 in ‘Love Your Block’ grants to support 21 projects to beautify 15 Hartford neighborhoods.)

Those are organizations that are saying ‘hey, Hartford is as much of a destination as anyplace else. Let’s ensure that there are neighborhoods of choice within Hartford.’

Affordable housing has become a hot-button issue at the state legislature. The Hartford Foundation has been providing testimony on this and other issues. Has the foundation been getting more involved in public policy, particularly in the legislature?

A. We will advocate on legislation that we have knowledge or experience in, or investment in.

We are a registered lobbying organization. It’s a small part of what we do, but we realize that so many of the barriers and inequities that exist, and that we are trying to address with our grant-making, have their origins in legislative initiatives.

So, we want to at least be at that table to weigh in where we think we have standing based on our work, investments or our own experiences.