Typically, a private foundation makes grants to further its charitable work and makes investments to increase or maintain the size of its endowment. Increasingly, however, foundations are breaking down the wall between their endowments and their grant dollars, employing both to further their charitable work.
Program-related investments (PRIs) have elements of both investments and grants. They also have unique advantages. A PRI is a qualifying distribution that counts toward meeting the foundation’s annual minimum distribution requirement. However, whereas grant dollars go out the door never to return, PRI dollars are generally recovered in part or in whole, and may even earn some return for the foundation in the form of interest or appreciation.