Investment returns and demand from the retiring baby boomers will fuel growth
Los Angeles, CA (PRWEB) September 04, 2012
In the past five years, the Donations, Grants and Endowment industry has endured adverse conditions due to the economic downturn and volatility in the financial markets. In this report, revenue consists of contributions, grants, investment income and realized gains. Prior to 2008, contributions helped drive double-digit revenue growth as wealthy individuals looked into philanthropy, making significant donations to foundations and driving industry revenue. However, according to IBISWorld industry analyst Anna Son, “Industry revenue was crippled as businesses and individuals curbed their giving as a result of the recession and credit crisis.” Consequently, IBISWorld estimates that industry revenue will decline at an average annual rate of 4.7% to $80.9 billion over the five years to 2012. However, as the economy continues to recover, industry revenue is expected to rebound 3.7% in 2012.
Due to the poor financial market performance, foundations struggled to generate investment income, further hurting revenue during the recession. Additionally, grantmaking foundations' ability to reinvest profit into their company, as profit margins plunged from about 8.2% in 2007 to 5.1% in 2012. However, after the two consecutive years of a double-digit decline, revenue for the Donations, Grants and Endowment industry surged by 18.7% in 2010. This recovery was a result of large companies beefing up their charitable giving, including Walmart, Goldman Sachs, Citigroup and others. Moreover, the commitment of many foundations to maintain their grant budgets or reducing the extent of reductions relative to their assets helped offset what would have been even great declines in foundation giving since 2009. Foundations also benefited from the relatively low level of competition that they face from other organizations. “While the majority of industry operators are smaller organizations, even the largest foundations focus on giving to local causes, meaning that there is space in the market for most industry operators to coexist,” says Son. For example, the Bill and Melinda Gates Foundation gives to charities in the Northwest region, while the Lilly Endowment is a major contributor to charities and causes in Indiana; however, neither entity competes with the other. Furthermore, the myriad of charitable causes, both domestically and internationally, ensures that market participants usually find their niche.
Industry revenue is forecast to increase steadily over the next five years. During this period, demand for industry services is expected to remain stable due to charities' and individuals' continued reliance on foundation giving; healthcare and education will continue to benefit from the largest shares of foundation grant dollars. In 2013, foundation giving is expected to remain consistent, posting only modest growth. While many foundations will likely be able to keep their giving steady over the next year, some are expected to have to make further cuts in order to preserve profit margins. However, as businesses return to profitability and individuals' wealth improves, they are likely to raise their charitable giving, thus boosting industry revenue. Furthermore, corporations and other for-profit groups will continue to open trusts and foundations as a way to promote a positive image of their organizations. For more information, visit IBISWorld’s Donations, Grants & Endowment in the US industry report page.
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IBISWorld industry Report Key Topics
This industry comprises organizations known as grantmaking foundations or charitable trusts. Establishments award grants from trust funds based on a competitive selection process or by the preferences of the foundation managers and grantors. Industry operators may also fund a single entity, such as a museum or university. Due to the unique structure of this industry, revenue is calculated by adding contributions, grants, investment income and realized gains.
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