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Over the past 10 years, foundations, corporate philanthropy, and donor-advised funds have become much more strategic in their grantmaking efforts. The focus of the field was shifted to asking grantees to be intentional about measuring their outcomes. Increased attention to strategy has resulted in philanthropy becoming more risk averse, leading nonprofits to focus on easier-to- achieve outcomes. transformational change becomes harder to achieve due to innovation taking a back seat to securing funding. Without intentionally broadening one's grantmaking portfolio, funders miss out on maximizing their social return and will lose out on meeting the community's evolving needs. Grants can be diversified through a balance of grant types in the operations, growth, and risk categories.

Fund managers and individuals use Diversification to balance their portfolios. This approach allows the investor to seek out lesser known, new, and innovative companies that may perform better than the market as well as maintaining their positions in generally stable opportunities. This approach is well suited to grantmaking.