Bill Gates Issues Buffett-Like Letter on Foundation, Says Market Rout Hurt Endowment.
By ROBERT A. GUTH (WSJ)
In a letter inspired by billionaire Warren Buffett's annual letter to shareholders, Bill Gates issued a 20-page look at the state of his foundation, saying his huge charity will give out a record amount of money this year even though the stock-market rout has hurt its endowment.
In the letter, aimed at partners of the Bill & Melinda Gates Foundation, Mr. Gates said the value of his charity's endowment dropped 20% in 2008, faring better than many of its peers and many large investment funds. Mr. Gates didn't disclose the current size of the foundation's endowment, but the drop implies a value of between $30 billion and $31 billion. (See the full text of Gates's letter.)
"I never thought I would say losing 20% is a reasonable result, but it is better than most endowments because so many asset classes went down by more than 20% in 2008," Mr. Gates wrote. Mr. Gates in his note said that, despite the drop, his foundation will increase its spending $3.8 billion in 2009 -- an increase from $3.3 billion last year. The figure includes an amount that Mr. Buffett gives once a year from shares in Berkshire Hathaway Inc. he donated to the Gates Foundation in 2006.
The letter included a few references to Mr. Buffett, a close friend of Mr. Gates. Mr. Buffett encouraged him to write the letter, Mr. Gates wrote. Mr. Buffett is known for his witty and widely read annual letters to Berkshire Hathaway shareholders.
Mr. Gates's comments come as philanthropic foundations and non-profit organizations are being battered by the financial crisis. Endowments are falling while demand for many nonprofit services is growing as the economy worsens. As the world's largest private philanthropy - even with the drop in value of its endowment -- the Gates Foundation is closely watched by other non-profits as well as governments and workers in the sectors where it gives grants, which include global health, education and development issues such as financial services for the poor.
The economic problems are bad timing for Mr. Gates. He left full-time work at Microsoft Corp. last year to focus on philanthropy. He needs strong partners in government, the private sector and other non-profits to help spur advances in the areas his foundation focusing. In his letter, Mr. Gates noted that cuts in government funding at home and abroad could undermine advances in coming years in health and education.
The letter overall was upbeat, reflecting Mr. Gates's unwavering optimism about the ability of technology and hard work to change people's lives. He pointed to progress he sees in health, saying he is hopeful that within six years the world -- presumably with funding from the Gates Foundation -- will find a way to for people to protect themselves from getting HIV/Aids. "I don't see the economic recession changing the foundation's goals -- just making them significantly harder to achieve in a particular time frame," Mr. Gates said on a conference call Monday.
Keeping spending up is crucial, "otherwise we will come out of the economic downturn in a world that is even more unequal, with greater inequities in health and education and fewer opportunities for people to improve their lives," he wrote.
Mr. Gates wrote that he is urging government leaders to keep up spending on foreign aid, noting that Norway, Sweden, Denmark and the Netherlands are big donors relative to the size of their economies. He singled out Italy as one country that's cutting aid. "I'm hopeful the government will find a way to restore this funding" when it hosts the G-8 nations later this year, he wrote.
While the economic crisis won't be over in the short-term -- in the next two years or so -- Mr. Gates said, he predicted that "if you take a longer timeframe, such as five to ten years, I am very optimistic that these problems will be behind us." In particularly, Mr. Gates said that developments in materials science, genetics, energy generation and other areas "will help improve the world and re-invigorate the economy."
Mr. Gates wrote that he'll repeat the letter every year. Next year, depending upon the economy, the foundation may not be able to raise its donations as it plans to do this year, "We have the same uncertainty about these things as everybody else," he said on the conference call.
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