Despite sour economy, Gates Foundation plans to expand

The world's largest philanthropy, the Bill & Melinda Gates Foundation, can afford to expand in spite of the economic downturn.

Next year the foundation, with an endowment of $35 billion, will grow "significantly" in both grant-making and operations, said Chief Financial Officer Alexander Friedman.

The Gates Foundation has a different problem than most nonprofits. It has to work hard to spend its money fast enough.

As a nonprofit foundation, it's required to distribute at least 5 percent of its assets a year. In July the foundation also received an installment of $1.8 billion from investor Warren Buffett, which must be spent in 2009.

Those two streams of dollars come into the foundation from a separate account, the Gates Foundation Asset Trust, which is managed by an outside fund manager.

Next year's installment of Buffett's gift could reflect the market downturn, since the gift comes in the form of Berkshire Hathaway B shares. On Friday those shares were down by about 18 percent from the same time last year. The value of the Gates Foundation endowment was also down to $35.1 billion in October from $35.9 billion in June.

Most foundations fund what they can from limited budgets, usually 5 percent of their endowments, which historically suffer during market downturns.

"For us we think of it slightly differently," Friedman said. "We're committed to meeting the funding requirements our program strategies are designed around."

The Gates Foundation determines its goals first, and then decides how much money it will need to achieve them. The foundation's ambitions include eradicating malaria, finding a cure for AIDS, supporting an agricultural revolution in Africa and improving education in the U.S.

As for the stock market and the economy at large, even Friedman, a former investment banker at Lazard Freres, won't hazard a guess.

"It's unprecedented for everybody," he said. "I just have no idea what the year's going to end like."

Kristi Heim: 206-464-2718 or kheim@seattletimes.com