Raising money for charity has never been easy, but in the last nine months a group of fund managers has raised $1.64 million for children’s causes.
It’s an impressive number, and Wilson Asset Management founder Geoff Wilson says if the model works, the group could contribute triple this amount within the next year.
And he expects the group to contribute more than $20 million a year within the next decade to a series of charities aimed at helping children and people with mental health issues.
The initiative is a creative philanthropic twist on the funds management business model, which has traditionally charged for its services based on a percentage of funds under management. Wilson convinced 33 highly regarded fund managers and a handful of administration and service providers to offer their services for free.
He set up two ASX-listed investment companies and assured investors they could earn better than market index returns if they invested. The vehicles would take the obligatory 1 per cent that would otherwise be paid to the managers and donate that direct to chosen charities.
The first Future Generation Investment Company invests in the domestic equities market and listed in September 2014 with $200 million, while the Future Generation Global Company invests in overseas equities and listed in September 2015 with $302.1 million.
The compounding effect is built into the model: the bigger the funds get, the more money they give away. Initial shareholders hold options that will be called on to raise additional capital at the end of the first year which means if performance is good they’re assured to grow.
In its first full year, Future Generations Investment Company returned 11.3 per cent, 3.2 per cent better than the ASX All Ordinaries Accumulation Index.
“It’s clear it’s up to private enterprise to step up in some of these areas, particularly where the issue might not be an area where government wins votes by focusing on,” Wilson says.
Louise Walsh, who left her position as chief executive office of Philanthropy Australia at the end of last year to become co-CEO of Future Generations, says the government allocates half the amount it should to mental health, given the scale of the problem.
A good year to have a conscience
For Geoff Wilson, the seed to set up the charitable structure was planted when he was exposed to mental illness and children at risk while volunteering as a Lifeline counsellor as part of a company initiative.
The result was possibly the most tangible outcome of a social impact investing initiative in Australia in 2015. This type of investing is growing quickly.
Social and affordable housing is an obvious area where private money will be put to work to solve shortfalls in government funding, says Richard Brandweiner, chief investment officer of First State Super, the $52.3 billion superannuation fund.
Brandweiner and four of his contemporaries, including Cbus investment manager of public markets Brett Chatfield, have formed an informal working group to discuss with government ways to invest in areas such as social housing.
If superannuation money finds its way into such projects, there would not be any compromise on investment returns, Brandweiner emphasises.
“Coming up with ways to deploy capital that meets traditional fiduciary tests while making a huge difference to society is an exciting prospect,” he says.
The signs for progress towards this goal are good. The NSW government launched two social benefit bonds in 2013.
The Newpin social benefit bond, developed in partnership with UnitingCare Burnside and Social Ventures Australia, raised $7 million to help safely restore children to their families and prevent children from entering out-of-home care. The Benevolent Society Bond, with The Benevolent Society, Westpac and the Commonwealth Bank, raised $10 million for the Resilient Families Service to work intensively with families to improve relationships and parenting, and prevent children from entering out-of-home care.
“We are encouraged by the results we have seen so far and are excited about what the future will hold for social impact investment in NSW,” says NSW Treasurer Gladys Berejiklian.
Two more similar projects will likely emerge in 2016 in the areas of supporting vulnerable young people and managing mental health hospitalisations.
Meanwhile, the NSW government created Australia’s first social impact investing policy, which highlights 10 actions to deliver more social impact investing actions and remove barriers for investment.
Mr Brandweiner described this year as the most important year to date in terms of matching capital to areas where society is facing challenges.