ASX-listed Future Generation funds have given millions to charities.
The Future Generation investment companies are an excellent example of the rise of impact investing, a growing trend in Australia and internationally. As the accessibility and ease of investing increases, younger investors more than any other demographic are searching for companies that provide both an investment return and a positive social impact.
Future Generation’s model delivers investment and social returns. It provides investors with exposure to the best Australian and global fund managers without paying management or performance fees; provides charities with a stream of annual donations; and gives fund managers a unique opportunity to make a difference to Australia’s future generations.
One of the benefits of the Future Generation model is its simplicity and accessibility, with no minimum investment required and allowing a range of investors to invest. Since 2016, Future Generation has partnered with CommSec to offer a refund on all brokerage when purchasing Future Generation Investment Company Limited (ASX: FGX) or Future Generation Global Investment Company (ASX: FGG) shares through a CommSec trading account.
Prominent managers and charities
Future Generation Investment Company gives investors the opportunity to gain unprecedented access to a group of prominent Australian fund managers in a single investment vehicle while supporting Australian charities focused on children at risk.
The 14 supported charities are: Act for Kids, Australian Children’s Music Foundation, Australian Indigenous Education Foundation, DEBRA Australia, Diabetes Kids Fund, Giant Steps, Kids Helpline, Lighthouse Foundation, Mirabel Foundation, Raise Foundation, Variety, United Way, Youth Focus and Youth Off The Streets.
Future Generation Global Investment Company provides shareholders with diversified exposure to selected global fund managers while investing in charities focused on changing the lives of young Australians affected by mental illness.
These eight charities are: beyondblue; Black Dog Institute; Brain and Mind Centre; Butterfly Foundation for Eating Disorders; headspace; Orygen – National Centre of Excellence in Youth Mental Health; ReachOut Australia; and SANE Australia.
Investment returns
Most actively managed funds charge annual management and performance fees. Investing in Future Generation funds gives investors the opportunity to invest with Australian and global fund managers at a cost of 1 per cent, a significant discount to the 1 per cent management fee and 20 per cent performance fee often charged by many actively managed funds.
Both Future Generation investment companies aim to deliver low-volatility, risk-adjusted returns through capital growth and fully franked dividends.
Recent research* of the Australian boutique funds management industry has shown that Australian equity investment managers have continually outperformed their benchmarks, with the median boutique outperforming the benchmark by 2 per cent and 2.7 per cent per annum over seven and 10 years respectively. (*Fidante Partners, The Boutique Advantage, Michael Kretschmann & Nick Hamilton.)
Since inception in September 2014, Future Generation Invesment Company’s portfolio has increased 8.9 per cent per annum, outperforming the benchmark by 3.5 per cent. This outperformance has been achieved with less volatility as measured by standard deviation, 6.8 per cent compared to the market’s 11.7 per cent.
Future Generation Global’s highly diversified investment portfolio consists of 13 fund managers with investments in 15 global funds and has delivered less volatility than the index since inception in September 2015, with a standard deviation of 8.9 per cent compared to the market’s 10.2 per cent.
Social returns
In addition to delivering risk-adjusted returns to shareholders through capital growth and fully franked dividends, the two funds provide a significant, permanent and growing stream of funding to charities focused on Australia’s future generations. In October 2017, they invested $6.8 million in Australian charities.
Future Generation (FGX) invested $3.8 million in October 2017, primarily in charities focused on children and youth at risk. This supported several initiatives, including essential crisis support and counselling to more than 250 children orphaned or abandoned due to parental drug use; cultural mentoring and support for disadvantaged Aboriginal youth; and specialist music teachers for more than 1,700 disadvantaged children.
Future Generation Global in October 2017 gave $3 million to eight charities that provided vital work to support children and youth mental health, and allowed the Butterfly Foundation to launch Australia’s first intensive outpatient program for young people aged 14 to 24 with eating disorders.
Some Australian families have spent more than $100,000 sending their children to a similar US clinic. FGG was the seed funder to launch this Australian program.
Savings for investors
Through pro-bono support from fund managers, service providers and board members, Future Generations’ social return of 1 per cent of assets each year can be made while benefiting shareholders. This support represented savings of $10.1 million last year, which significantly exceeds the combined investment of $6.8 million to charities.
Since inception, Future Generation has invested more than $13.2 million for children at risk and youth mental health, and it expects the annual amount will grow each year.
