"Should a private foundation be more than a private investment company that uses some of its excess cash flow for charitable purposes?"
This was the question that the Board of Directors of the F.B. Heron Foundation posed several years ago as it considered how best to use the Foundation's assets to promote its mission of helping low-income people and communities build assets and create wealth. The question was a provocative one because it challenged one of the prevailing orthodoxies of organized philanthropy—the belief that mission is best served by constructing a "wall" between program and investment management, with the latter seeking to maximize financial return (usually without consideration of mission) and the former dispensing grants for mission. In 2003, private foundations managed assets of nearly $500 billion while providing grants of $29.7 billion in accordance with IRS charitable distribution requirements. The question above, answered in the affirmative by our Board, has shaped our thinking and practice ever since.