Founded in 1937, the Lilly Endowment has spent a long time at the peak of American philanthropy. New generations of ultra-rich donors — Gates, Bloomberg, Soros, etc. — have supplanted many of the giants of earlier eras, but Lilly has not just kept its spot among the top 10 U.S. philanthropies. It has, in fact, grown much bigger.
A decade ago, the Indianapolis-based grantmaker told the IRS it had a $7.6 billion treasure chest. Over the next five years, that trove of riches nearly doubled in value. But that was only the start. Lilly’s most recent tax filing indicates that at the end of 2021, its endowment totaled nearly $32.8 billion, meaning that in less than 10 years, its assets have quadrupled in value, thanks to the gains of the Eli Lilly and Company stock that makes up the bulk of its holdings. The rise cemented its position as the second-largest endowed foundation in the U.S., trailing only the Bill & Melinda Gates Foundation.
In an era when fortunes are ballooning and new megadonors are shoveling money out the door, this 85-year-old institution’s windfall of the past decade is both a huge opportunity for grantseekers and a rare example of what it looks like when a legacy foundation grows as fast as its younger, fast-moving peers.
Thanks to a spike in the Eli Lilly stock price earlier this year to a record high of $375, the endowment may have briefly hit the $40 billion mark, which would theoretically put its minimum required payout at $2 billion a year, according to an analysis that John Seitz, founder and CEO of the philanthropic investment tracking firms FoundationMark and FoundationIQ, performed for Inside Philanthropy.
“What do you do? Do you expand your mission? Or do you just money-hose the existing mission?” said Seitz. I asked if he had ever seen another foundation grow this fast. His reply was immediate: “Absolutely not. Nowhere near.”
Lilly declined to comment on its current endowment or payout, referring me to its tax filings, auditor’s report and annual reports. The foundation also declined an interview, but a spokesperson answered some questions via email, including providing details about last year’s grantmaking.
Stock price fluctuations, distribution rules, expenses and other factors mean Lilly’s assets and payout for this year will likely land somewhat below the high water marks set this winter. But its grantmaking has still been growing fast.
The endowment gave out $728 million in grants in 2021 and $790 million the year before, according to its tax filings. By the end of last year, it was required to distribute another $1.16 billion, its auditors reported. And if the stock stays close to its mid-March price of $329 a share, payout would rise even further in 2023, even if it doesn’t quite hit the $2 billion level.
The curious case of the legacy foundation that kept growing
How does a foundation created when Franklin Delano Roosevelt was president and lacking a living billionaire benefactor not just grow, but multiply in size?
Unlike most of its legacy peers, Lilly has nearly its entire endowment invested in a single stock: LLY, or Eli Lilly and Company, the pharmaceutical giant whose namesake founder launched the foundation with his father and brother. Lilly held over 107 million shares of LLY at the end of 2021, representing more than 90% of the endowment’s value, according to tax filings.
As the company’s stock price has soared, so has Lilly’s grantmaking power. Worth about $35 in 2010, LLY stock had roughly doubled in value by 2014, only to more than double again by 2020 and do it once more in the last two-plus years. Tax rules allow the endowment to calculate its required payout using a price for LLY that is lower than what you might see on a stock ticker, but the upward trend remains.
The pharmaceutical company has outperformed the S&P 500 Index since 2018 thanks to gains in market share for many of its drugs, particularly its flagship diabetes treatment, and sales of its COVID-19 antibodies, according to a Forbes report from last October. And some analysts are still bullish despite recent tumbles.
Separate from its stock gains, Lilly receives annual contributions from a trust. But over the last decade, those awards have averaged $2.5 million a year, based on analysis by Seitz, effectively a rounding error for a multibillion-dollar institution. He calculated that Gates Foundation, over that same period, has received contributions from its uber-wealthy founders and their friend Warren Buffett totaling nearly $32 billion.
Two philanthropy historians I consulted, Benjamin Soskis, a senior research associate at the Urban Institute, and Stanley Katz, a decorated lecturer at Princeton University, could think of few parallels for Lilly’s rapid growth, particularly among the country’s largest institutions.
“To some extent, Lilly is an outlier both in how its assets have grown… compared to Ford, Rockefeller, MacArthur, etc., who have seen their wealth decline relative to some of the newer foundations — and also in the low profile it tends to take,” said Soskis via email, referring to other legacy foundations.
“A booming time in Indiana”
Who might benefit from this bounty? Much of it is likely to stay close to home. More than half of Lilly’s grant dollars have been spent in Indiana over the past five years, with a total of $1.3 billion granted across the Hoosier State over that period, according to Candid. Lilly, too, says the majority of its grants go to Indiana organizations.
Lilly has sent eight-figure checks to both the local chapters of national groups like United Way and Goodwill in recent years, as well as to state-based institutions like Independent Colleges of Indiana and the Capital Improvement Board of Managers of Marion County, Indiana.
As Seitz puts it: “This might be a booming time to be running a [nonprofit] in Indiana.”
As those recipients suggest, Lilly makes a lot of grants in traditional areas like education, human services and community and economic development. Over the past five years, large awards have gone to Indiana private colleges like Butler and DePauw universities, national groups like the American Red Cross and Salvation Army, business organizations like the Central Indiana Corporate Partnership, and housing and community nonprofits in the state.
Yet the priority that distinguishes Lilly from most other major philanthropies is religion. Lilly has sent $702 million in grant dollars to causes under that tag since 2019, now comprising its top funding area in recent years, according to Candid. (The endowment’s annual report indicates that dating back to its founding, religion has been its third-leading funding priority, after education and community development.) Lilly’s support for religion targets Christian traditions, with grants spanning more than 65 denominations, according to the foundation.
Academic institutions with Christian roots are a favorite. Major gifts have flowed to theological seminaries from Princeton, New Jersey, to Pasadena, California; to liberal arts schools founded by Christian ministers like Wabash College and Duke University; and to colleges across the country with Christian ties, such as St. John’s University and Seattle Pacific University. There are also some awards going directly to religious groups, such as the Saint Meinrad Archabbey, a Benedictine monastery founded in 1854, and the General Synod Council of the Reformed Church in America, a governance body.
With its grants budget rising fast, Lilly appears to be doubling down on its religious legacy. In January, it renewed its Thriving Congregations initiative, announcing plans to issue roughly 60 grants of up to $1.25 million to support Christian churches in the United States. It has also extended its partnership with African American Cultural Heritage Action Fund, continuing the $20 million-a-year Preserving Black Churches initiative, which issues grants of up to $200,000 to restore and protect historic Black houses of worship. And one of its biggest single programs has spent nearly $210 million over the last two years to support theological schools in the U.S. and Canada, according to the foundation.
“Programmed to deal with this kind of thing”
Lilly is undergoing a boom in grantmaking that is rare among legacy institutions, but has at least a couple historical analogs.
Soskis pointed to the 1950s, when the Ford Foundation struggled to raise its payout fast enough to keep pace with the spiking profits of Ford Motor Company, whose shares at that time dominated the grantmaker’s investment portfolio. He cited “The Big Foundations,” a 1972 book by philanthropy scholar Waldemar Nielsen, which points out that Ford’s trustees coincidentally launched a program at that time to support private colleges around the country. Adjusted for inflation, the plan would be worth $558 million today.
Consciously or not, Lilly appears to be taking a page from Ford’s playbook. Late last month, it announced a $300 million initiative that will fund community development projects at 35 colleges and universities in Indiana, and at the beginning of this year, it announced a $30 million grant to Wake Forest University. Last year, the foundation’s major grants included awards for the American Indian College Fund ($39 million) and Early Learning Indiana ($55 million), a representative said.
That said, support for universities has been a mainstay of Lilly’s grantmaking for many years. And universities are far from the only beneficiaries of the new bounty. For instance, the foundation also made $40 million grants last year to both the American Red Cross and Salvation Army, a package of five grants totaling $80 million to improve Indianapolis parks, and another $95 million bundle of grants for Indiana’s youth programs, according to the foundation.
Katz, meanwhile, named a contemporary comparison: the Gates Foundation. Instead of a skyrocketing stock, the foundation has Buffett. Dating back to 2006, the billionaire investor has sent some $35.7 billion to the institution. Katz noted that Buffett has set a timeline for these gifts to be used, so they have helped lead the foundation to ramp up its grantmaking even more rapidly than before, at times by as much as $1 billion a year.
Yet in today’s era of mega philanthropy, that type of increase is not a surprise. “The way the staff of Gates thought about the Buffett gift — they were programmed to deal with that kind of challenge,” he said. “Lilly isn’t as large but it’s pretty large. And they are also programmed to deal with this kind of thing.”
Retailers versus wholesalers
Whether it’s the Gateses, MacKenzie Scott, or the earlier era of Chuck Feeney and Atlantic Philanthropies, there are plenty of examples of living donors moving vast new quantities of money fast. But it is less familiar territory for a legacy institution.
Will it be hard for Lilly to distribute another $500 million to $1 billion? It depends who you ask.
“It’s one thing if you’re a $10 million foundation and you’re giving half a million dollars, and if it goes up a lot, you can give all your charities more,” said Seitz. “But they’re giving away $800 million, and that needs to double, basically.”
Katz, however, does not see an issue. To him, the key is the typical size of existing grants. Katz likens it to the difference between retailers and wholesalers. “Once you know how to make endowment gifts, or truly large grants, multimillion-dollar grants, it’s not very difficult to do,” he said. “Gates is a wholesaler and wholesalers know how to move gifts. Ford is a wholesaler. Lilly is a wholesaler.”
Seitz also noted that Lilly has some big awards under its belt. For instance, the grantmaker sent $100 million to the National Urban League in 2020, its largest grant in the past five years, according to Candid. “They’re not afraid to write big checks,” he said.
Lilly also grants in a way that buys it time. Like many philanthropies, particularly rapidly growing ones, Lilly generally maintains a one-year lag in its payout. Most years, the endowment distributes enough to cover the prior year’s required minimum payment. Essentially, it is always playing catch-up, as is permitted by law.
The eight-decade-old institution has not recently — and perhaps never — grown its grantmaking this fast, according to Seitz. Its largest jump in the last decade was a nearly 46% increase in 2020, a more than $250 million increase, he found. And grantmaking actually fell the following year.
Based on what Lilly shared with me, ramping up has not been a problem. It’s impossible to know for sure until their next tax filing is released, but with tens of millions of dollars going out the door for new grant programs, it seems the foundation is keeping pace.
That said, as long as LLY’s stock continues to surge, the country’s second-largest foundation will start each year needing to distribute more funding than the last — sometimes, hundreds of millions of dollars more. Barring a company collapse, we will see even more big checks coming from Indianapolis in 2023 and the years ahead. And for Christian-oriented organizations and Indiana-based nonprofits, it’s a particularly fortunate time.