In London last month, the head of Alliance Trust PLC (the UK’s largest investment trust) delivered a lecture titled ‘Finance as a force for good’. Alliance’s CEO Katherine Garrett-Cox CBE defined the concept saying: “Good as I see it, is about building a resilient business, being relevant for future generations and having a culture that is strongly anchored upon a sense of responsibility towards others.”

The philosophy flies in the face of some of the pervasive stereotypes about the finance industry, which ignore the fact thatmany of the institutions that form our financial system support corporate social responsibility (or CSR) initiatives by investing both time and money.

In Australia recently, a group of professionals from the finance industry has been the driver behind an innovative business model that embodies the approach towards achieving a greater good as advocated by Ms Garrett-Cox. The Future Generation Investment Fund Limited is a listed investment company that aims to deliver returns to its shareholders while also supporting children’s charities. It is the first of its kind in the Australian market and through this vehicle there is the opportunity to change the lives of Australia’s future generation.

The company is created with the dual objectives of investing in children’s charities as well as offering investors diversified exposure to Australian equities. Set-up as a fund of funds, Future Generation Investment Fund offers investors unprecedented access to some of Australia’s best fund managers, including funds that are now closed and wholesale funds not open to retail investors.

There are 0.0% management fees and 0.0% performance fees as these fund managers have agreed to provide capacity to the company in their managed funds at no cost. The company will have few expenses as many suppliers are also donating their services. This pro bono support will allow the company to donate 1.0% of its assets to children’s charities each year thereby investing in Australia’s future generation.

Some of the fund managers include David Paradice, Peter Cooper, Philip King and Stephen Aboud. The unique approach is based on the Battle Against Cancer Investment Trust (BACIT), a UK listed investment company, which aims to deliver its investors superior returns by investing its capital with fund managers who have agreed to manage the money for no fees. As a result, the company is able to donate 1.0% of its assets to charities, primarily those supporting cancer research. BACIT was established almost two years ago and in that time has more than doubled its
capital and delivered shareholders an annualised return of 11.8%. Its shares have traded at a premium since it listed.

Importantly, it has donated more than £3 million (around AUD $5.8 million) to charities. The model is a win for charities and a win for investors. Investors gain unprecedented access to some of Australia’s best fund managers and diversified exposure to Australian equities through the different managers’ styles and strategies with a skew towards absolute return, small cap and mid cap investing.

The Future Generation Investment Fund is currently undertaking a capital raising of up to $200 million. Investors cansubscribe for shares (with one attaching option) for $1.10 each. The offer opened last week and is expected to close on 3 September 2014.

Back to blog