How to decide if spending down is right for your foundation

Recent years have seen several funders pausing their grant programmes, whether in response to unprecedented numbers of applications, or to carry out strategic review.

Some have gone even further and opted to ‘spend down’ their resources. This means disbursing a foundation’s endowment faster than the rate of return on its investments and within a strategically designated timeline.

For example, Lankelly Chase announced in 2023 that, in recognition of the harms done by traditional philanthropic practice, it would be radically redistributing all its assets and closing within a five-year timeframe.

Interestingly, Lankelly Chase actively rejects the terms ‘spending out’ or ‘spending down’, seeing this as fundamentally an accelerated version of the traditional philanthropic model. Instead, they frame their decision as a process of redistribution – breaking up their own institution so that capital can be owned or controlled by others.

Albert Hunt Trust announced later that year that it would be spending its £50m in assets by 2029 in order to “to utilise the resources of the Trust in a targeted way to achieve the Trust’s objectives at a time of unparalleled need.’’

At NPC we frequently support clients to think about options for spending down their resources, whether as part of winding up or to support a shorter-term uplift in grant-making.

This might be motivated by a drive to interrogate the traditional model of philanthropy and think about the power they hold within the wider funding system.

Or it might be a philosophical decision around how to balance the pressing needs of service users today against hypothetical future needs of service users in generations to come. This plays into ongoing discussions about foundation payout ratios.

As The Levitt Foundation, a US arts funder, put it:

We asked ourselves: How much greater impact could be realized if we invested more in communities today, rather than maintaining a standard pace of giving?

Or it might be for more practical reasons—such a funders who no longer have sufficient time to dedicate to their grant-making, or for whom passing on to a ‘next generation’ is not an option, or whose funding comes from a legacy not intended to exist in perpetuity.

Often, taking a spend-down or time-limited approach can encourage funders to think strategically over the lifetime of the fund and to maximise the impact of every grant or investment in the short to medium term. But this is balanced against a need to retain sufficient funds at a sector level future needs, and not leaving existing grant-holders feeling they are being left behind.

How to do approach the decision about spending down

If you’re a trustee of grant-making organisation that’s been considering spend down as an option, how could you approach this decision and what are some of the factors you might want to consider?

1. Motivation: Firstly, it’s important to be honest about your motivations. Is this interest in spending-down driven by a desire to radically alter existing power dynamics, for example, or by a desire to maximise impact for people and planet at a time of unprecedented need? Alternatively, is this a move driven primarily by necessity, perhaps due to constraints on trustee or staff capacity or a desire not to commit younger generations within a family foundation to continuing your philanthropic work?
2. Timeframe: If you do want to spend down, what is an appropriate timeframe to settle on? At this point, you might want to consider how need is changing in your current focus areas and whether there are any time-limited opportunities that increased spending might unlock. Equally you may want to consider how different time horizons will expose your endowments to differing levels of investment volatility and the consequent impact on grant budgets.
3. Structure: Would your strategic decision to spend-down be best served by merging or transferring your endowment to another charity or funder? How will you manage the ‘tail’ of the spend-down process and tie up loose ends once your funds have been spent?
4. Processes: Grant making processes and focusses rarely stay constant when a decision to spend down is made. For example, will a bigger or smaller grants budget change the types of organisations you support, or the types of grants you make, and what will be the implications of any changes from a DEI perspective? How will you communicate any changes to others, including current grant-holders?
5. Resourcing: Spending down typically requires much more upfront capacity from both staff and trustees, both in the planning phase and in the delivery phase. How will work be delegated between trustees, committees and/or staff members? How might you plan for succession during the spend-down period if staff or trustees leave?

These are all key questions to ask yourself. Equally it’s important to consider how the learning and insights you will have developed as a grant-maker can stay within the sector, so that this knowledge continues to benefit people even after your organisation has stopped making grants.

What next?

If you’re interested to learn more about different approaches to spending down, the Tubney Charitable Trust produced a useful report reflecting on its experience of the process.

Blogs from Lankelly Chase in the UK and The Levitt Foundation in the US describe the journey that these two funders are currently on as they begin their spend down journeys.

NPC has experience of supporting many different funders to explore or to adopt a spend down approach. If you’re a funder interested in maximising your impact and evaluating your approach to grant-making, contact us below to explore what these questions might mean for you.

Join us for an event on spending down on 6 May 2025

Photo by Noemí Jiménez