The $230 million NZ ‘community foundation’ sector is set for extraordinary growth as a strong pipeline of bequests flows into the nationwide network of charitable funds over the next couple of decades.
Eleanor Cater, Community Foundations of NZ (CFNZ) member services director, said the 17 underlying regional-based charitable funds have secured bequests amounting to a collective $600 million plus with growing interest from a wide range of donors.
“The potential for growth is phenomenal,” Cater said. “We’re at the start of the biggest intergenerational wealth transfer in history and we see many Kiwis looking for ways to leave a legacy and make a sustainable positive impact on their communities. Increasingly, many choose to do this through a bequest invested in their local community foundation that can provide income to causes of their choice.”
She said community foundations have also seen increasing interest from smaller local trusts looking to combine their funds with like-minded, well-governed philanthropic organisations.
“The idea of [charities] pooling money makes a lot of sense,” Cater said. “There are many community-funding charities in NZ that are not managing their money very efficiently, some simply holding their money in bank accounts. Community foundations offer a good solution for resettling the funds of those smaller charities, enabling their purpose to continue under a more robust management and distribution structure while creating economies of scale.”
To date, foundations across NZ have absorbed a total of about $40 million from other charitable trusts.
In February this year CFNZ published a white paper with legal firm Dentons Kensington Swan on the potential for greater collaboration among philanthropic charities in NZ.
Not to be confused with the larger, for now, Community Trust sector, the foundations trace their origins back to a North American movement that has since spread through Europe and Australasia.
The launch of a community foundation about 20 years ago in Tauranga, seeded by the Tindall Foundation, marked an important origin moment for community foundations in NZ with almost every region now covered bar three South Island areas: Dunedin, West Coast and Southland. Tindall continues as a CFNZ supporter, helping establish foundations in new regions, in particular.
Cater said the remaining NZ regional gaps should be filled over time, rounding up the community foundation population to a likely 20.
CFNZ – staffed by Cater and executive director, Arron Perriam – offers networking and best-practice standard-setting for members that operate as independent entities.
While there is some talk of sharing services, such as a common statement of investment policy and objectives (SIPO), the foundations maintain separate boards and investment strategies.
About half of foundation funds are currently invested via long-time CFNZ sponsor, Craigs Investment Partners, with the rest split among a handful of other managers.
However, as money continue to flow into the foundations via bequests and charitable mergers the scope for wider interest from other fund managers will only pick up.
The Tauranga-based Acorn Foundation, for example, has bequests of about $250 million of anticipated future funds.
Unlike the better-known Community Trusts, which have a more-or-less static pool of capital to call on, the foundations can tap into the flood of intergenerational wealth transfer coming over the next decade and beyond.
“This is still early days for the community foundations in NZ. Over the next 10 to 20 years the foundations will be receiving some very big gifts,” Cater said. “It will create an even stronger philanthropic sector supporting worthy community causes across NZ.”
If the current growth-rate is sustained, the foundations’ assets under management should eventually outstrip the $3 billion held by Community Trusts.
CFNZ held its annual conference near the end of May, addressing some of the common themes including investment presentations by Craigs head of private wealth, Mark Lister, and EriksensGlobal consultant, Peter Verhaart (who also serves on the board of the $80 million Nikau Foundation – the Wellington community foundation).
Perriam said in a post-symposium report: “If our May 2022 conference was indeed a litmus test, then I think the test result was a resounding ‘positive test’ that overall our CFNZ membership network is grounded in a very healthy organisational culture.”
For further information visit the CFNZ website.