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Thursday, April 03, 2008

From the Subprime Crisis Department: Charitable Foundation Hit Hard

According to news reports, the McCune Foundation, one of the nation’s largest grantmakers with more than $600 million in assets (as of 2006), by my guesstimate among the nation’s 150 largest foundations by asset size, has suffered severe losses attributable to the subprime mortgage mess. Evidently, the southwestern Pennsylvania philanthropy suffered a $150 million loss and has temporarily suspended its grantmaking activities for the next several months. Evidently, the Foundation owned a large stake in National City Corp. whose stock went from a trading high of $38.32 a share to a low of $6.56 because of the subprime mortgage crisis.

Although the Foundation is required by §4942 of the Internal Revenue Code to continue to payout 5% of its assets each year, the Foundation’s total asset based has declined by about 25% which means about $7-8 million fewer grant dollars reaching the charitable stream. The McCune Foundation concentrates its giving primarily in the Pittsburgh area but makes grants nationally. Upon review of the Foundation’s most recent annual report, it looks like some public charities most likely to be effected may include the Carnegie Library of Pittsburgh, Carnegie Mellon University, Allegheny General Hospital, Children's Institute, Goodwill Industries of Pittsburgh, Pittsburgh Opera, Pittsburgh Life Sciences Greenhouse, Pittsburgh Zoo & Aquarium, and Social Innovation Accelerator. Since I clerked in the ‘Burgh, albeit nearly a decade ago, I remember many of these excellent organizations who will feel the sting.

Too bad McCune’s board didn’t follow the most basic lessons of Investing 101. I love the advice Yale’s investment guru, David Swenson, gives: “Stick to a simple diversified portfolio, keep your costs down and rebalance periodically to keep your asset allocations in line with your long-term goals.” Perhaps Pittsburgh area charities should chip in to pull together $20 to buy McCune a copy of Swenson’s book.

Posted by Garry Jenkins on April 3, 2008 at 01:17 PM | Permalink

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Comments

It's a lot more complicated than that for this foundation. Mr McCune started one of the predecessor banks to Nat City, the Union National Bank. Apparently, his will which created the foundation had a provision stating that a significant percentage (don't know what %) of the assets had to be held in Union National Bank stock (and also Texaco of which he was also a giant shareholder). I reckon the Texaco successor stock has done just fine but the Nat City not so good. Definitely a lesson in controlling things from the grave. The world rarely shapes up as one might think it will, no matter how clever the thinker.

Posted by: Pittsburgh | Apr 5, 2008 5:02:00 PM

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