I have been thinking a lot lately about the impact of tough economic times on smaller businesses and their philanthropy – the subject of Carol Tice’s article in October’s Entrepreneur Magazine for which she interviewed me. However, this morning in the USA Today was an article by Emily Bazar and Dennis Cauchon, Financial mayhem hurts non-profits, foundations. Watching the news about the market situation last week, until I read this article, I now realize that it had not yet fully clicked through for me the impact this volatility was having not only on businesses but also on community foundations and nonprofits that invest in the stock market. The article talks about the greatest impact being on those community organizations that rely on endowments and donations as they are expected to decline – resulting in lower payouts from foundations in upcoming years because of what is happening now.
The article talks about the role of diversification of financial portfolios as a way to minimize losses…however the closing quote from John Griswold, executive director of the Commonfund Institute, stated that “Diversification has been the name of the game in endowments, and that’s good,” he says. “The problem is, in a crisis like this, everything can go down and diversification doesn’t help.”
To read the full article, click here.