From 2023, the fund will be fully financed from the income from these capitals. In addition, the foundation became independent from the founder. Potanin transferred not only the capital, but also the management to the team and the board of the fund and refused any leverage.
“The time has come to step aside and hand over control to an independent council and a professional team,” Potanin explains his decision in an interview with Forbes. “Now that the endowment has been formed, the fund has significant funds and its own permanent sources of funding.”
The billionaire created the Vladimir Potanin Charitable Foundation in 1999 to systematize personal charity. Over the years, the organization has grown into an effective private foundation, which over 24 years of operation has supported more than 40,000 people by spending 12.2 billion rubles (of which the foundation and its founder donated 1 billion rubles to endowments of Russian NGOs). In 2022, the fund’s budget reached 2.11 billion rubles, the fund runs five programs in the fields of culture, higher education, sports and philanthropy development throughout the country and holds about 20 grant competitions every year.
The Potanin Foundation was the first to systematically develop the topic of endowments — endowment funds that allow a non-profit organization to have a regular income and maintain stability. In 2006, it was Vladimir Potanin who headed the Commission for the Development of Charity, Charity and Volunteering in the Public Chamber and lobbied for the adoption of the law on endowments in Russia. The law was passed at the end of 2006. In 2007, Potanin, along with other MGIMO alumni — USM founder Alisher Usmanov and Kazakh billionaire Fattakh Chodiev — made a donation to the country’s first endowment fund, the MGIMO endowment. The Potanin Foundation and the businessman personally transferred money to various endowments throughout the country, for example, funds at large museums (the State Hermitage and the Tretyakov Gallery) and small organizations (the Vrubel Museum in Omsk).
In 2012, the Vladimir Potanin Charitable Foundation launched the Endowment: Growth Strategy program and supported endowment knowledge centers. Since 2017, together with the Skolkovo School of Management, he has been holding the Endowments forum.
But the fund went to its own endowment for a long time. It was only in 2021 that the Potanin Foundation began to create endowment capital, although the idea arose long before that. According to Oksana Oracheva, General Director of the Fund, the team was waiting for the necessary amendments to the legislation. When they were accepted, the first endowment was created in the amount of 10 billion rubles. At the same time, Potanin announced that he would increase its size to 100 billion rubles by 2032, but he did it faster. The Vladimir Potanin Charitable Foundation has become the largest shareholder of Rosbank, but the shares and all corporate governance rights are held by six management companies: RB Capital Management Company, TKB Investment Partners, TrustUnion IM, Trinfico Management Company, BCS Management Company , RVM Capital.
The council for the use of endowment capital includes economist Andrey Sharonov, art historian Zelfira Tregulova, financial director of the fund Elena Bayukova and vice-rector of the Russian Economic School for student and alumni relations Zarema Kasabieva.
In addition to the shares of Rosbank (87.5%), the capital is invested in government and corporate bonds (12.4%), only 0.1% is accounted for cash and deposits. Depending on the state of the market, the fund can include up to 10% of the body of capital in income, as well as use income from previous years. Potanin emphasizes that in charity, as in business, the main work should be done by professionals. “Almost from the moment the fund was created, I tried to give up my personal preferences and trust a professional team. The programs that the foundation is doing, I think, continue to be in demand. But the most important thing is that the foundation I created has become a kind of “growth point” for systemic charity in our country,” Potanin told Forbes.
Since 1999, the foundation has existed according to the classical model of a private foundation. “Funding was stable, but allocated on an annual basis,” says Oksana Oracheva. “Thanks to the endowment, the foundation became independent of annual funding, and this is the first time in the history of Russian philanthropy that a grant-giving organization becomes independent and self-financed.” “Charity is also a kind of business,” the president of Interros is sure. “This is also a matter that needs to be organized in order for the assistance to be effective.” In August 2022, a separate chapter about its founder appeared in the updated charter of the foundation: the foundation does not bear any obligations to the founder, and the latter does not have property rights in relation to the foundation and does not bear obligations to it.
At the same time, Potanin does not leave charity. “I decided a long time ago that my capital should serve for the benefit of society,” the owner of Interros clarifies. – At one time, the main tool for the implementation of this concept was the charitable foundation I created, over time, other directions appeared. The better we begin to understand what problems society and people have, the wider the field of activity. After the deal with Rosbank, within a few months, the Potanin fund team switched to a new model of work. The Fund had to synchronize numerous procedures and requirements of legislation on charity and non-profit organizations, on joint-stock companies, and the securities market. “What has changed for the fund team with the advent of the endowment? Everyone felt responsible not only for the result of charitable programs, but also for the financial income of the organization,” Oracheva notes. — We are not indifferent to the fate of Rosbank, it is important for us that the bank is doing well. And we also see that this process is an opportunity for the commercial and non-commercial sectors to get to know each other better, there are a lot of myths and stereotypes around them.”
The institution of endowments has been growing steadily since the adoption of the branch law. In 2007, there were 19 endowments in Russia with a total value of 1.5 billion rubles, and by the end of 2022 there were more than 200 with a total value of 146 billion rubles. According to the analytical report “Endowments in Russia: Status and Prospects”, at the beginning of 2022 there were 224 active endowment funds. “Every year the number of non-profit organizations that have endowment capital is increasing, this year the increase was 32 units,” notes Ksenia Obukhova, General Director of the Local Community Capital Foundation, a leading expert of the Penza Knowledge Center on endowment capital.
In second place after the Potanin Fund in terms of the amount of endowment is the Endowment Management Fund “School Letovo” with 9.4 billion rubles, in third place is the Endowment Fund for the Development of Children’s and Youth Football of FC Dynamo Moscow with 6.2 billion rubles . The Skoltech Fund, the leader of previous years in terms of the amount of endowment, dropped to fourth place from 4.6 billion rubles.
The main areas for the development of which endowment funds are being formed are education and science, social projects, art and culture. “In fact, universities have become pioneers in this area, MGIMO, MISiS, St. Petersburg State University and dozens of other universities have been partially funded from endowments for several years. And university graduates were the main donors,” says Lyudmila Panteleeva, director of the Philanthropist endowment fund.
However, among the owners of large capitals, endowments are not yet so popular. One of the first endowments was created by the Victoria Foundation, its founder Nikolai Tsvetkov transferred the building to the ownership of the foundation, which became the target capital. In 2020, the building was sold and the capital turned into cash. Its current size is 234.7 million rubles, which allows Victoria to steadily develop long-term programs and primarily support the village of foster families in Armavir.
The founder of the Letovo school, Vadim Moshkovich, created the endowment in 2011. “From the first day of the Letovo School’s establishment, we also began to form an endowment fund – this alone speaks of our attitude towards endowments,” says Moshkovich. “Despite the challenges we all faced in 2022, our endowment is alive and well and growing. Moreover, over the next few years, we plan to bring its volume to such a level that it can cover development projects, and not just the current expenses of the school.” Moshkovich says he is looking 10-20 or more years ahead so that the school is not financially dependent on the founders and early benefactors. Igor Rybakov has his own platform, Legacy Endowment Services, which helps schools and other non-profit projects create and manage endowment funds free of charge. Legacy is funded by its own endowment of 19 million rubles. In total, 31 endowment funds are in service of Legacy, among them are the funds of the Phystech Lyceum. P. L. Kapitsa, Gymnasium No14 in Yoshkar-Ola, Elista Lyceum and the Selo Charitable Foundation. Another Rybakov’s project, Equium, also has its own target capital of 346 million rubles.
A similar service was launched by the Rossium Concern of Roman Avdeev and Sergey Sudarikov, having created a specialized endowment fund called the Philanthropist, built on the “fund of funds” principle. This is a ready-made platform that will allow individuals and legal entities to create their own targeted capital. The founder of GES-2 and the VAC fund, Leonid Mikhelson, has his own endowment. The size of the capital of the Specialized Endowment Fund for Support of Culture and Art “Space Expansion” is about 851 million rubles.
Why didn’t endowments become a mass tool for Russian billionaires? According to Veronika Misyutina from the Skolkovo Center for Wealth Management and Philanthropy, there are several reasons: the individual circumstances of Russian capitals and capitalists, the systematic character of charity, and the peculiarities of the development of financial markets. “There is a certain sequence, the logic of the life cycle of capital and their owners,” says Misyutina. — Just like the stages of maturity of a non-profit organization. An endowment implies the transfer of assets, rights and responsibilities, it is a tool for the maturity phase.”
“There are not many endowments yet, but this is also a point of growth,” Lyudmila Panteleeva is sure. “I attribute the lack of endowments for many private foundations to the habit of philanthropists in our country to give money here and now, and not for long-term tasks.”
“The first stage in the development of private funds around the world is annual funding, and as the funds develop, endowments arise. Many Western private foundations in the early years were on annual funding,” says Oksana Oracheva. Endowments will gradually appear with other owners of capital, experts have no doubt. According to Lyudmila Panteleeva, in other countries, many endowments have existed for more than 100 years, and participation in their capital has already become a habit for most philanthropists. Without exception, all the largest private funds have endowments. The top 25 largest funds have perpetual funds, of which the top 10 have more than $10 billion each.
“Our philanthropy is still very young,” says Oksana Oracheva. — There are practically no other instruments for the sustainability of charitable foundations. But if there is a desire for the fund to remain, it is necessary to provide it with resources.” “Any systemic story requires long-term investment, and charity is no exception. Endowments are precisely the tool that does not give an immediate effect, but in the long term allows you to work calmly, without running every time in search of money to plug holes, says Vladimir Potanin. “I don’t see another such tool yet, so I think that endowments will continue to develop.”