The foundation of Walmart heir Lukas Walton has reached its goal of aligning 90% of its $1 billion endowment with its philanthropic initiative.
The foundation is part of Builders Vision, Walton’s impact platform, or family office, which also includes a venture capital arm, S2G Ventures and Builders Asset Management. Walton, a grandson of Walmart founder Sam Walton, has an estimated net worth of more than $21 billion, according to Bloomberg.
The philanthropic side, which includes a foundation, an LLC and a donor-advised fund, makes grants and investments focused in food and agriculture, climate and energy, oceans, and community.
“If we are going to make lasting change happen, we need our mission to show up in everything we do – especially in how we commit our resources,” Walton said in a statement.
Mission-related
Most philanthropic foundations have long operated with two buckets of capital: an endowment that is invested in legacy financial instruments to generate the highest possible risk-adjusted returns, and a program side that gives the money away, primarily through grants. Under U.S. tax law, foundations are required to distribute at least 5% of the endowment asset value each year.
More recently, some foundations, including the Heron, McKnight and Nathan Cummings foundations, have moved to align some or all of their endowments with their missions. They’re in rare company. According to the Council on Foundations, only one in five foundations even screen out investments that are inconsistent with their mission.
In 2017, the Ford Foundation carved a $1 billion mission-related mandate from its then-$12 billion endowment to target affordable housing, financial inclusion and, more recently, quality jobs. The mandate was to be invested over 10 years; by the end of last year, the foundation had invested $385 million of the $425 million allocated so far.
Last month, the Ford Foundation’s CEO Darren Walker reported that the foundation’s mission investments had generated a compound annual return of 28% through 2021, “triple the return required to sustain the foundation’s perpetual existence.” Walker’s caveat: those returns are still mostly unrealized, since the bulk of the mission-related portfolio is in illiquid funds that have not yet returned capital to investors.
“We’re not saying, ‘Mission accomplished,’ or declaring victory,” Ford’s Roy Swan told ImpactAlpha. “But our performance should give some confidence about how you can be successful from a social impact perspective and a financial returns perspective.”
Impact portfolio
It’s too early to assess the returns at Walton’s Builders Initiative Foundation, chief investment officer Noelle Laing said in an interview. The investment policy was approved in 2020; Laing said she spent last year bringing recommendations for each asset class to the investment committee.
In public equities, Builders Initiative selected Ownership Capital, an Amsterdam-based manager that spun out of the pension fund PGGM in 2013. The firm describes itself as “a fundamental, long-term equity investment manager that combines fundamental company analysis with ESG integration and active engagement.”
In fixed income, Builders Initiative is invested in Nuveen’s Core Impact Bonds strategy, an actively managed fund of U.S. fixed income products. In private equity, the foundation has committed to Ember Infrastructure Fund I, which invests in the energy transition, water and waste as well as industrial and agriculture resource efficiency and reduced carbon intensity. For example, New York-based Ember has invested in Caban Systems, which provides renewable power and storage for cell phone towers and other digital infrastructure.
Laing said the foundation is seeking risk-adjusted market rates of returns in each asset class. “We’ve been able to find 90% of a billion-dollar portfolio where we believe, depending on the asset class, we can achieve that return.”
So why not 100%? “We could definitely see that go higher, but because we are targeting market rates of return and we have to think about diversification and liquidity and all of that,” Laing said. “To get higher, we really need to see continued strong investable options across asset classes. We could definitely go there, but we need to make sure we’re doing it in a prudent way.”
