Instead of always investing in Wall Street, Hutton Parker Foundation president Tom Parker wants other private foundations to follow his lead and pursue local loans and grants.
He hopes his new book — The $100 Million Secret: Why (and How) Foundations Should Invest in Community Instead of Wall Street, written with Michael Bowker — will inspire them to do the same.
The Hutton Parker Foundation was started in 1998 with $45 million in assets. By 2012, that had doubled to $90 million. Foundations must donate 5 percent of their assets every year by law, and they traditionally invest in stocks and bonds.
Had he continued to follow that formula, Parker says, the foundation would have ended up with $35.5 million — not $90 million — and distributed less in loans and grants.
At 73 pages, Parker's book is a quick read, and it lays out evidence of the Hutton Parker Foundation’s success with this concept.
“Other foundations were living in the Dark Ages and so was I,” Parker told Noozhawk. “What happened here over the last 15 years does work, and it’s simple at its core.”
The foundation took a big hit in 2002 after the stock market had “a major correction.” In response, Parker says, he decided to keep money local in program-related investments and he began buying office buildings to lease out to nonprofit organizations.
“It’s in my nature” to think outside the box and develop a new business model, he said.
The very first loan was $400,000 to the Santa Barbara Rescue Mission. The 4.5-percent interest brought in the same yield that a bond portfolio would have, but it benefited a local nonprofit, Parker says.
Foundations can even call their loans grants instead, to lower their total assets, but they must put the repayment back into the nonprofit sector.
The Hutton Parker Foundation has been giving out program grants to nonprofit organizations in the meantime, although, as a result of the recession, Parker says the focus in the last three years has been on core support for programs.
Parker says these local investments are more beneficial to the community and the foundations can get the same or better returns than they do on Wall Street.
The implications are huge, he says, since the nonprofit sector makes up 8 percent of the gross national product and 10 percent of the workforce.
Parker sees the nonprofit sector as the “conscience of capitalism” and is still surprised it never came up in his years teaching economics or working in the real estate market.
Today, the Hutton Parker Foundation owns 16 office buildings housing nearly 100 nonprofit tenants in the Santa Barbara County area. In 2009, the foundation branched out even more and bought The Bank of Santa Barbara with the Orfalea Family Foundation and Bernie and Tim Marquez of Venoco Inc.