Thursday, September 25, 2008

Star(r)light ...

In my view The Starr Foundation has been one of the best in New York. Its management is highly competent, it is open to new ideas and people coming in; it is one of the few major foundations who will make operating grants rather than limiting itself to capital (makes those grants as well) or specific projects. It is no-nonsense. A program officer there once told me "we are here to give away money and I am always on the lookout for good things to give money to." That you don't hear much. What you get is "you don't fit our priorities," i.e. foundation-speak.

Starr is the giving arm of AIG.

Oh oh.

The foundation got its start-up money from the estate of Cornelius V. Starr, an insurance magnate who developed the Asia market before WW II - and thereafter was funded with AIG stock. NPR and Bloomberg news reported on Monday that AIG stock was once 90% of its portfolio. Starr's president Florence Davis noted that Starr had sold two-thirds of its AIG holdings between 2006-2008. But exactly what the foundation's corpus is right now is unclear because the sale of price of AIG stock fluctuated and we don't know what investments replaced it, or what they may have earned and she didn't say. But she did promise that present commitments would be honored.

Starr's tax return for 2006 (Form 990) is the latest posted on Guidestar and showed the fair market value of assets at over $3.3 billion. Assuming a yearly 5% payout, the norm, yields grants over $150 million. Close enough. In 2005 they granted out $162 million.

If Starr was 90%invested in AIG stock in 2006 - the year of their last tax filing - that would have reduced the corpus to $330 million and cut grants to about $15 million - about the size of many of the family foundations I work with. How much did they actually lose? AIG stock traded at $3.93 at noon EDT today. Ouch.

In the past Maurice (Hank) Greenberg the former CEO of AIG essentially controlled the foundation. For example he had to sign off personally on an eight-figure gift to an Oram client a few years ago and also gave the nod each time on several seven-figure grants to another one. He may have stepped away but we really don't know. He is certainly otherwise occupied.

Everything here you could have pieced together elsewhere. With one difference: Starr has been a real leader in philanthropy, and a great example for how - on the good side - foundations should behave.

It's easy to stay angry at AIG. But join me in hoisting one for Starr and for hoping they'll come back - bigger and stronger than ever - with the most diversified portfolio we've ever seen!

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