Barry Berlin met Diana Blank in 1992 and has served as her financial advisor for more than 30 years. What follows are his reflections on that joint journey. Offered as a resource for high-net-worth individuals exploring spending their wealth through philanthropy, this essay may be particularly instructive for philanthropists with a single source of wealth, as they navigate their investment choices.

Diana Blank’s charitable activity began in late 1993 when she began to make personal grants, mostly in her hometown of Atlanta. Over time, her vehicles for giving have broadened to include two donor-advised funds (DAFs) and, since 2006, a charitable trust known as The Kendeda Fund. The primary source of Diana’s assets initially consisted of stock in The Home Depot (NYSE: HD), obtained through a divorce proceeding. In all, Diana has given away well over $1 billion over three decades.

During my long career as a wealth advisor, every client proved unique. That said Diana is more unique than most. Her key drivers and values still resonate today:

  • The decision to give away the vast majority of her wealth during her lifetime, driven, in part, by her sense of urgency to address today’s challenges;
  • Her desire for simplicity, arguing for a fairly straightforward approach, and a small team managing her financial and philanthropic affairs;
  • A willingness to make “big bets” on new leaders and ideas in philanthropy, and not be constrained by boards, committees, trustees, and other operational structures common among foundations;
  • Her expressed desire to go slow with diversification, at least in the early years, given confidence in The Home Depot’s leadership; and
  • Her confidence in a trusted advisor to guide most aspects of her finances, while protecting anonymity for herself.

Multiple Charitable Giving Vehicles

In the early years, Diana gave out-of-pocket, using both stock and cash. At that time, she was easing into her giving, and was not yet ready to utilize a formal vehicle. Relatively quickly, however, she established several DAFs, and formed The Kendeda Fund in 2006. 

Through 2023, Diana continued to pursue her philanthropic work using all available giving platforms (direct out-of-pocket, DAFs, and the charitable trust). Using multiple formats gave her great flexibility and considerable federal tax relief. Even after the formation of The Kendeda Fund (the charitable trust), much of the funding was “pass through,” where Diana would contribute to the Kendeda Fund, and then subsequently make grants from the trust’s assets. No sizable endowment within the trust ever existed.

Takeaway: We maximized flexibility and tax benefits by maintaining multiple vehicles for charitable giving and eschewing endowing the Fund up front, even though we understood most assets would ultimately be donated.

Establishing The Kendeda Fund

Diana’s comfort with philanthropy began to grow, and by early 2006, she felt ready to structure her giving with a bit more rigor and scaffolding. This included hiring a couple of advisors to help with grantmaking. Such decisions came after many years of somewhat scattershot philanthropy guided more by instinct than a grand strategy. She knew more focus would require a team with distinct skills, yet Diana wished to remain anonymous to the world at large. 

To honor Diana’s preference for privacy, we established a structure that maintained both anonymity and control. Diana was not a trustee of The Kendeda Fund (my firm played that role); thus, neither Kendeda’s 990 nor its Trust documents list her name. During this period, we also began working with Foundation Source, a for-profit philanthropy service organization that became our back office and grants administration partner. In doing so, Kendeda could more effectively operate and create a more robust paper trail. 

Takeaway: As Diana’s grantmaking evolved, a more formal arrangement helped satisfy the original goals while creating a more public, yet anonymous, presence.

Approach to Single Stock Source of Wealth

Diana, like many others in her position, had a profound wealth concentration – low-basis stock in The Home Depot. Modest diversification into a variety of other assets occurred over time, but the proportion in HD remained robust. Since 2003, that single stock has enjoyed an astonishing performance edge versus the S&P 500.

As illustrated in the diagram below, with a core stock that significantly outperformed the Index, Diana’s asset base had a strong tailwind. Her confidence in management tempered my instinctive urge to diversify. Holding a large concentration did simplify portfolio management and giving; low-basis stock made for great charitable currency. Finally, investment fees were much lower considering the large concentration.

During the decade spanning 1994-2005, Diana retained most of the HD stock. Modest diversification included high-quality U.S. equities, smaller domestic companies, international stocks, high-grade bonds, hedge funds, and some private equity exposure. Liquidity was important, given her active grantmaking, but early-on some larger gifts were executed in HD stock. When the stock price was relatively low, we tended to use other accumulated liquid assets. When the stock seemed higher (with The Home Depot’s astonishing growth, the definition of “high” was redefined many times), we either liquidated shares within a charitable format or gave the stock outright.

During the 2007-2008 bear market, our high concentration of HD stock added to our vulnerability from a philanthropic perspective. We had a candid conversation with Diana during that time about the need to either moderate her giving or face a more imminent spend out. She chose the former, fortunately only necessary for a short period of time.

Takeaway: The single stock concentration worked in our favor, and we tried to be opportunistic in our selling moments. We were very fortunate that HD stock bounced strongly after the 2008 meltdown.

Pivoting for A Timed Spend Out

In 2013, after consultation with her team, Diana set the timeline for her spend out to be completed. We pinpointed the end of 2023 as our official spend-out date and began to seek advice from other limited-life foundations. 

Also in 2013, and occasionally since, my team conducted Monte Carlo analysis to see how the asset pool would stretch over ten years, so we might better know what to expect if markets swooned or soared. That analysis helped inform annual grantmaking budgets in a progression that would last ten years. Our analysis included a gradual step-down of HD concentration.

One important, early conclusion was the need to “lock down” asset value so another severe bear market would not shorten the 10-year period or cause unmet commitments. To do that, we knew we needed to further diversify. During that period, we were opportunistic. When HD stock seemed expensive, we sold large blocks to create a cash reserve that would suffice during fallow periods. The overall proportion of assets in HD stock was reduced considerably from 2013 to 2023, removing material risk of shortfalls in funds. In retrospect, holding onto more HD stock longer may have resulted in even more funds to disburse, but we didn’t know that then. The chart below details the significant diversification as a means of risk mitigation over the last decade.

Takeaway: The spend-out scenario shortened the investment time horizon, requiring a tightened focus on cash needs and asset levels.

Modeling Investment Outcomes

Curious to know what might have transpired had we pursued other investment and divestment strategies, we recently modeled other, hypothetical approaches to Diana’s portfolio for comparison. The findings were instructive. Had Diana put her original asset pool into a typical endowed foundation with a broadly diversified portfolio, giving 5% per year (with another 1% for expenses), the results would have been quite different (see Hypotheticals A and B below). We first modeled two diversified approaches, and then considered the HD stock-based asset (Hypothetical C). The diversified comparisons reflect a more typical endowment or foundation, with no tax consequences and no asset concentrations. Ultimately, this example points to the powerful impact of HD shares during a lengthy bull market.

While Hypothetical C, in retrospect, may have seemed like the ideal route, a fuller analysis is critical. We traded off the possibility (not the guarantee) of single asset appreciation to build in more confidence in our assets available for philanthropy. In those last ten years, we made many multi-year commitments to grantees and built long-term grantee relationships with assurance, approaches that reflected Diana’s desired style of philanthropy. These would have been more challenging to do with integrity if Diana had maximized her retention of HD stock throughout. 

These comparisons illustrate the classic conundrum facing holders of a single stock. While Diana had confidence in The Home Depot, there are many less successful examples: Circuit City, Enron, Sears, or any number of other failed businesses. Some studies suggest that 50% of public companies eventually fail. We followed a middle path, keeping substantial exposure to a great company, while diversifying to prevent disaster should a financial storm hit.

Takeaway: Consider (and reconsider regularly) diversification as an option, not a necessity. Time stock gifts/sales as opportunistically as possible. Predictive models can add perspective. Locking in your asset base removes variability and allows for greater certainty in budgeting for grantmaking.

On Fiscal Governance

A more typical fund governed by a board might have felt that fiduciary responsibility required aggressive diversification. How did we avoid “full diversification,” where HD was sold up front in favor of other assets? One clear difference emerges – The Kendeda Fund has always had a living donor in Diana. She could choose to diversify or not, and didn’t tend to either extreme, taking a practical approach. The trust document names a third-party corporate trustee. That trustee did diversify when The Home Depot hit the Kendeda portfolio, but Diana could control the flow of HD stock to the trust, thus limiting diversification. Not every philanthropic situation enjoys this luxury.

Takeaway: Boards have positive and negative aspects. In The Kendeda Fund’s case, the donor’s desire for simplicity and decision-making authority were paramount.

Final Thoughts

Philanthropists who wish to distribute great wealth have many options: various charitable fund formats, staff composition (if any), committees and boards, holding versus diversifying assets, and so on. Modeling, such as Monte Carlo analysis, can help plot the range and probability of future outcomes, provided the future looks more or less like the past. But ultimately, no one can predict markets accurately or determine if a single stock is worth keeping. Diana Blank and The Kendeda Fund traveled a middle path while enjoying a tailwind from The Home Depot. Others may be less fortunate.

Importantly, Diana’s approach fit her “style.” It was fairly simple, with baked-in flexibility, nimble investment management, and an attentive (and small) team. While not suitable for every situation, the solutions described here more than met the moment, with charitable giving likely to exceed seven times the original asset pool. Ultimately, our use of a variety of financial strategies described herein delivered a significant spend out that met the donor’s financial goals while dispersing significant assets aimed at addressing many of the critical issues of our time.