Payout Planning in Volatile TimesGrant Makers in Health ConferenceMarch 13, 2013

Payout Planning in Volatile TimesGrant Makers in Health ConferenceMarch 13, 2013

Foundation Alignment

SpendingPolicy

ProgramStrategy

Asset Allocation Strategy

Spending Policy

§ RWJF should exist in perpetuity

§ RWJF seeks to maintain purchasing power over time

§ RWJF can reduce purchasing power for periods of time

Progress Since 1972

2012Purchasing Power ($ in billions)

2012 Assets 9.1

Inflation Adjusted Corpus 9.1

Change in Corpus 0.0

Cash Paid Since 1972 ($ in billions)

Qualifying Distributions 9.0

Taxes/Investment Expenses 0.9

Total 9.9

Progress Since 1972

2012Purchasing Power ($ in billions)

2012 Assets 9.1

Inflation Adjusted Corpus 9.1

Change in Corpus 0.0

Cash Paid Since 1972 ($ in billions)

Qualifying Distributions 9.0

Taxes/Investment Expenses 0.9

Total 9.9

Program Strategy

We drive social change to improve healthTarget defined areas (Impact Framework)

Make dollar commitments to certain fields public (e.g., Childhood Obesity)

Approve multi-year awards and programs

Program Strategy

We drive social change to improve healthTarget defined areas (Impact Framework)

Make dollar commitments to certain fields public (e.g., Childhood Obesity)

Approve multi-year awards and programs

This approachUses the strength of our brand and reputation

Enables us to attract some of the best scientists and leaders

Allows for sustained focus to drive change

Program Strategy

We drive social change to improve healthTarget defined areas (Impact Framework)

Make dollar commitments to certain fields public (e.g., Childhood Obesity)

Approve multi-year awards and programs

But this approach creates financial challenges

RWJF Programming

Program Budget

Approved Awards

CashApproved Authorizations

Draw down Awards

Cash

Current Year

Current & Future Years

Approvals

Approvals are Not the Same as Payout

0

50

100

150

200

250

300

350

400

450

2012 Cash Paid Unpaid Admin & Capital Prior Year Awards

2012 Approvals 2012 Payout

2012Approved and Paid

Program Inventory

$ in

Mill

ions

719

0

200

400

600

800

1,000

1,200

1,400

1,600

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 After1/13

BoardUnpaid Grant Liability Unpaid Authorizations

1,361

1,009

754865 896

1,0971,143

903750

1,433

624 680

PercentAvg. Assets 16% 13% 9% 10% 10% 11% 12% 12% 9% 8%17% 7% 8%

Asset Allocation Question

§ Should we limit volatility given programming style?

or

§ Adjust programming style to absorb volatility?

How to Manage in Downturns

§ Protecting against downturns:

• Reduce the length of program authorizations and awards

• Limit ratio of commitments to average assets

§ To get there:

• Approve shorter programs

• Approve “up to” (not fixed) amounts for some programs

• Use more planning grants and milestone funding

• Be cautious about beginning new branded programs

§ Side benefit: more frequent program assessment

How to Manage Growth

§ Scale up without long-term commitments

• Absorb Growth with awards that payout quickly

• Keep multi-year budgets steady; increase gradually

How to Manage Growth

§ Scale up without long-term commitments

• Absorb Growth with awards that payout quickly

• Keep multi-year budgets steady; increase gradually

§ Ways to get there

• Waiting lists of additional projects

• Pre-funding disaster relief or future studies

• Pre-funding programs for accelerated payment

Foundation Alignment

SpendingPolicy

ProgramStrategy

Asset Allocation Strategy