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Are endowments characteristic of nonprofit activity? It’s probably true that only a minority of charities have endowments, but it’s hardly unknown – nearly every nonprofit college and university has one, not just the elite schools at issue here, including Hope College (a little over $200 million).
And the Chronicle of Philanthropy just last week published an article reviewing nonprofits with endowments. Many of them are colleges and universities, but museums, hospitals, historical societies, the American Cancer Society, the Southern Poverty Law Center, the Knights of Columbus Charities, and the Rotary Foundation all have endowments, and the Chronicle article reviewed 1,600 nonprofit institutions with endowments.
Even if endowments weren’t characteristic of nonprofit activity, would that prove anything? If one believes that all charities have to look more or less the same, then perhaps. But such a framework would stifle innovation in how philanthropists and charities go about their good work. For example, I suspect few charities have what amounts to a private equity fund that invests in mission-directed companies, but the Juvenile Diabetes Research Foundation has exactly that, as The New York Timesrecently reported:
[Mr. Johnson] and his wife gave $1 million to a new nonprofit organization, the foundation’s T1D Fund, which invests in companies doing research into Type 1 diabetes. Any financial returns are used to make more investments….
Structured like a private equity fund, the T1D Fund has a minimum donation of $500,000. The fund, which received $32 million in seed funding from the foundation, has a goal of reaching $80 million. It already has $55 million.
Unusual? Definitely. Evidence that the JDRF or T1D aren’t really nonprofits? Hardly.