Should Philanthropy Be Sustainable?
Chuck Feeney Says “No”
“You Can Only Wear One Pair of Pants at a Time”
An Irish-American billionaire who kept his philanthropy secret for 15 years has given away more than $7.5 billion. He is now left with $2 million in his bank account at the age of 85. He wears a $15 Casio watch, travels in coach, and does not own a car. His name is Chuck Feeney, founder of Duty Free Shoppers and General Atlantic. In 2016, Feeney and his Atlantic Philanthropies gave out their final donation of $7mm to Cornell University to support students doing community service work. He wanted to hand out all of his money before he dies.
Philanthropies and Investments
Raised in New Jersey, Chuck Feeney served as a radio operator in the Air Force and attended Cornell University on the G.I. Bill. In 1960, Feeney and his partner, Robert Miller, set up a company that sold items like brandy and cigars to travellers in duty-free shops at airports. The business was called Duty Free Shoppers (“DFS”). He quietly transferred his entire 38.75% ownership stake in the company to Atlantic Philanthropies in the early 1980s, and Atlantic Philanthropies also started investing its capital in tech start-ups. In 1996, DFS was sold to LVMH for over $5bn. (Robert Miller remained as a significant minority shareholder).
The investment activities under Atlantic Philanthropies were formalized under Edwin Cohen and Steve Denning — both joining from McKinsey & Company — who started assisting other families and foundations with their investment activities. The firm is called General Atlantic (GA), and it manages over $24bn. GA is known as a trustworthy partner providing capital and strategic support for growth companies. They have built a strong ecosystem with other family offices, foundations and endowments. Despite its relationship with DFS (which was established in Hong Kong) and amazing long-term performance, not many Asian family offices recognize GA’s reputation. One of the challenges that Atlantic Philanthropies faced as it pursued its goal of giving away all of its assets before Feeney’s death was GA’s performance, which generated more cash flows to Atlantic Philanthropies than it could give away.
Should Philanthropy Be Sustainable?
In 2016, we published a whitepaper titled “An Endowment Approach for Sustainable Philanthropy” as well as 15 case studies on the largest foundations’ portfolio management. In the whitepaper, we discussed the merit of managing portfolios for philanthropic causes assuming the founders’ philanthropic impacts will last over many years to come. However, we intentionally omitted whether the philanthropic impacts should last many years beyond their lives. Like Feeney, it might be better to give away everything before he is called for the world above, or like Gates, it might make sense to set a limited lifetime (50 years after Bill and Melinda’s death) for the foundation.
Carnegie Corporation has one of the most successful and long-term track records of managing a philanthropic foundation portfolio. It was established in 1911 with $135 mm, which has thus grown to $3.3 billion as of 2014 while giving away on average 5% of its assets every year. Carnegie was lucky to have wonderful leaders such as Meredith Jenkins (former CIO from 2011 to 2016, listen to Ted Seides’s Capital Allocator podcast) and Kim Lew (current CIO, read our article, Mr. Carnegie and Ms. Lew). The problem is… not all foundations are as fortunate as Carnegie Corporation. Take Barnes Foundation as an example (page 10 of An Endowment Approach for Sustainable Philanthropy), lack of leadership can result in unsatisfactory outcomes. Another problem is increasing operating expenses to maintain their activities over time as the status quo leads some foundations to exist for their own sake rather than for philanthropic causes. Therefore, the question Feeney raised is very important: should philanthropy be sustainable?
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