Private equity boosts philanthropy

The Chicago-based MacArthur Foundation will augment its grant budget by $25m, thanks in part to its successful private equity investments.

Increasing its asset allocations to private equity has helped boost the returns – and by extension, the grant budget – of one of the largest, private charitable foundations in the US.

The John D. and Catherine T. MacArthur Foundation, based in Chicago, recently reported that its 2006 investments netted an 18 percent return, causing its assets to hit $6.12 billion (€4.6 billion).

A March 1 article in The Chicago Tribune attributed the rate of return to a strong stock market, as well as “a greater exposure to so-called alternative investments”, including private equity.

According to tax records, in 2005 MacArthur had more than $1.5 billion in book value of alternative investments, most of which were private equity funds.

The foundation declined to provide more specific details as to its private equity portfolios, but its annual report shows that 46 percent of its assets were dedicated to alternative investments in 2006. That allocation is a 6 percent jump from the previous year, and has effectively made alternative investments the class to which MacArthur devotes its greatest amount of funds.

In 2005, the foundation allocated 43 percent of its assets to public equities, 17 percent to public fixed income, and 40 percent to alternative investments. In 2006, the ratios shifted: 40 percent of its assets went to public equities, while 14 percent went to public fixed income and 46 percent to alternative investments.