July 23, 2008
Re-casting the supporting roles to bring mission investing to scaleBy Tim Ferguson, Founder, Chair and Managing Partner
As I discussed in my Perspectives piece on mission investing, a growing number of philanthropies are starting to direct their investments to the missions that are supported by their program dollars. These mission investors, however, face challenges that could thwart even the best of intentions. Foundation staffing is usually weighted toward program expertise, with little if any experience in investing. Very few traditional investment consultants have mission-investing functions. And even for foundations that are able to identify and tap the necessary expertise, there is a dearth of investment vehicles that can bring mission investing to scale.
Fortunately, these challenges are not insurmountable. They require a commitment to creativity and a willingness to accept risk, to look beyond old patterns and the status quo. The outcomes are worth the effort: mission-investing foundations effectively double the impact of their investment dollars. In this Perspectives piece, I’ll look at these challenges and some ideas for addressing them, particularly with promising urban small businesses that hold the potential to generate substantial job growth and wealth creation.
Investment help for philanthropies
The pared-down staffing patterns typical of many philanthropies often lead them to rely on help from outside investment advisors, fund managers, portfolio managers, and the like. These consultants and intermediaries have historically worked with endowments in much the same manner as they work with other clients, a strategy that generated little attention. Recently, however, public interest has been drawn to the fact that little if any effort is made to coordinate foundation investments with their missions. In fact, foundation investments have sometimes worked against the goals supported with grants and programs. As mission investing gains traction, this phenomenon highlights the need for foundations to seek out investment advice that furthers their missions.
Unfortunately, however, such advice is hard to come by. There is an ample supply of consultants and funds-of-funds with strategies and models that work in the current marketplace, a large market with a wide variety of investment vehicles. By definition, they are compensated for relying on their perspective – for viewing the world through the lens of their experience in that market.
