It’s been ten years since Geoff Wilson, Chair and Chief Investment Officer of Wilson Asset Management, founded the philanthropic juggernaut Future Generation. Shareholders, Australian non-profits and fund managers have benefitted ever since. So what’s the future for Future Generation?
The way Geoff Wilson tells the story, it all sounds so simple. While in London in 2012, the veteran fund manager happened to chance upon an article in the Financial Times. It was about a former fund manager, Tom Henderson, who was trying to raise a £500 million fund with the aim of generating millions for cancer research. The idea was to get a group of investment managers to manage the fund for free so that one per cent of its net assets could be donated – while still giving investors an enhanced return.
Always philanthropically inclined, Wilson thought to himself, “I wonder if I could build an investment fund back home that actually helps people.” He cold-called Henderson to learn more and – hey, presto! – within two years he had launched Future Generation through the IPO of two listed investment companies (LICs): Future Generation Australia (FGX) and Future Generation Global (FGG).
Fast forward ten years, and Future Generation now has more than $1 billion under management and has donated a staggering $87.2 million to support youth at risk and youth mental health, putting it among the top 30 corporate donors in Australia.
Yet that story – oft told by Wilson – belies the complexity of assembling a model that is radically changing the Australian landscape for community giving.
“I’m not sure there is another person in the Australian share market who could have pulled it off,” says Ben Griffiths, head of the Eley-Griffiths Group and one of the first fund managers approached by Wilson to manage Future Generation’s money on a fee-free basis. “I think even Geoff would concede that what FGX has achieved over its 10-year journey has exceeded even the most bullish expectations.”
Matthew Kidman, head of Centennial Asset Management and another of FGX’s pro bono fund managers, agrees. “It’s classic Geoff. I’ve worked with him for a long time and I’ve never met anyone with the same talent for picking up the phone to someone for the first time and talking to them like he’s known them for 30 years, galvanising them into action.
“But it certainly wasn’t easy. In the early days, Geoff was running around town with Kate [Thorley, the CEO of Wilson Asset Management] trying to drum up fund managers and investors. There was a lot of shoe leather and hard work involved!”
Wilson likes to describe Future Generation as a “win:win:win”, and to understand that description, you first need to understand how the investment model works.
Both FGX and FGG are managed by investment committees, whose best-in-class members work on a pro bono basis. Their role is to leverage their extensive networks to ensure that each investment portfolio has the right mix of managers and investment strategies to meet its objectives.
Investors buy shares in either of the two companies, which are listed on the ASX, with the capital then allocated to – and managed by – more than 30 Australian and global fund managers, including the likes of “Hall of Famers” David Paradice (of Paradice Investment Management), Peter Cooper (of Cooper Investors) and Phil King (of Regal Funds).
By working on an entirely no-fee basis, these fund managers enable a donation of one per cent of net assets annually to Future Generation’s non-profit partners, which work to support either children at risk (in the case of FGX) or to prevent mental ill-health and promote wellbeing in young Australians (FGG).
This means that for every $1 billion managed by Future Generation, $10 million is donated annually to charities including RAISE Foundation, BackTrack, Smiling Minds, the Australian Children’s Music Foundation and Giant Steps.
“It basically gives shareholders access to the best investment minds,” quips one investor. “But instead of our fees going towards another wing of a fund manager’s mansion in Toorak or Vaucluse, they go to charity.”
Under the model, shareholders, the not-for-profits and even the fund managers themselves benefit.
For investors, Future Generation offers exposure to quality Australian and global fund managers typically beyond their reach, with the investment goal of getting a fully franked dividend stream, long-term capital growth and capital preservation. Since inception, FGX has delivered an average annual return of 9.6 per cent, while FGG has returned 8.8 per cent, with less risk than usual.
It also provides them with the opportunity to make charitable donations without taking a hit in the hip pocket – in other words, to “do well and do good”. For the not-for-profits that Future Generation funds, it provides a reliable, multi-year funding stream, allowing them to focus on their core mission and long-term strategy, rather than fundraising.
For the fund managers, it offers the opportunity to make a significant contribution to the community without having to write a cheque, donate their time, or do additional work. They simply run the Future Generation money in their existing portfolios.
“It enables fund managers to do something good,” says Kidman. “Everyone wants a philanthropic cause but we don’t have the time to do a whole lot of work to get there. Future Generation provided an easy way.”
Mike Baird, the former Premier of NSW and a director of FGX, agrees. “There is so much goodwill in corporate Australia, but people often need a mechanism,” he says. “The Future Generation structure is such a mechanism. It’s incredibly innovative in that it allows fund managers to use their skills and expertise to create a serious funding stream for charities, seriously quickly.”
Even so, the speed at which Future Generation has grown has surpassed Wilson’s wildest dreams.
When he set up FGX in 2014, Wilson stated that his “big, hairy audacious” goal was to raise $100 million for Australian charities by 2030. Having already donated $87.2 million, Future Generation is on track to comfortably exceed that target. Although Wilson has yet to formally revise his giving goal, some suggest a more reasonable “stretch target” would be $150 million by 2030.
“If you had said to me, when Geoffrey first approached me, that Future Generation was going to be this successful, I would have said, ‘No chance!’,” says David Paradice, who has been a Future Generation manager since its inception. “I never thought it was going to roll out like it has!”
The group’s growing profile as a philanthropic and investment powerhouse has attracted heavy hitting directors.
Philip Lowe, Governor of the Reserve Bank of Australia from 2016– 2023, took over from Baird as Chair of FGX last May, in his first board appointment since stepping down from the central bank. “I think the Future Generation model is brilliant,” he says. “I’ve always strived to be associated with organisations that enhance the welfare of Australians, so it’s a privilege to work with Future Generation Australia’s shareholders and pro bono fund managers to support our most vulnerable youth.”
Dr Lowe’s appointment came hot on the heels of Jennifer Westacott, the former Chief Executive of the Business Council of Australia, assuming the Chair of FGG.
Future Generation CEO Caroline Gurney says the Future Generation model is “democratising philanthropy” in Australia.
“In Australia, you’ve got a high concentration of wealth, so you get the same people donating to the same causes over long periods of time,” she says. “But our model has no barriers to entry aside from being able to buy a few shares, so it really broadens the base of people who can make a real impact.”
Equally importantly, Future Generation is tapping into the burgeoning demand for effective giving. In 2020, FGG embarked on a full-scale strategic overhaul of its social investment program aimed at optimising the impact of its donations, while FGX recently kicked off a similar review.
The key aim of these reviews is to target areas that have high potential to create social good, but which are overlooked and underfunded by others, particularly government. FGG settled on preventing mental ill-health in young Australians because governments are spending only about one per cent of their mental health budgets on prevention, even as the youth mental health crisis worsens.
“This makes prevention an area in mental health where private givers can punch above their weight,” says Emily Fuller, Social Impact Director at Future Generation. “In the wake of the review, we evolved our approach to fund small to medium-sized non-profits with a proven track record, but still enough ‘runway’ to significantly deepen their impact. We provide them with multi-year, untied funding to grow their organisations. This method of giving, investing in the organisation instead of a specific project, is another way private givers can maximise their impact.”
FGX will adopt the same funding approach but will likely refine its cause area to focus on childhood maltreatment, after a landmark study highlighted the prevalence of abuse against young Australians and its long-term effects.
“I think Australians want to be a nation of givers but they want to do that in a structured way,” says new FGG Chair Westacott. “People have a very low tolerance for just giving money and not feeling that they’re part of something. The want to understand the effect of their giving.”
To this end – in what is believed to be an Australian first – FGG recently moved to quantify the collective social impact of its portfolio of not-for-profit partners. The company’s inaugural Impact Measurement Report, released in August, revealed that its 14 not-for-profit partners had more than 5.3 million young participants in their programs and services in 2023, as they worked to promote wellbeing of young Australians and prevent the onset of mental ill-health.
The groundbreaking move was hailed by high profile philanthropist David Gonski. “In these difficult times, we must do everything we can to understand how our mechanisms of support are working and can be improved. In the philanthropic world, we must do more to demonstrate the crucial work of non-profits in rising to meet society’s many challenges,” he told The Australian.
“[FGG’s] Impact Measurement Report is a rare contribution to that end and shows how Australian investors, corporations and non profit organisations can come together to achieve real outcomes for young people.”
David Paradice says fund managers are used to measuring portfolio performance and recognising how important allocation is to overall success. “It’s really exciting to see Future Generation now bringing this kind of thinking to how we can help young Australians more meaningfully,” he adds.
While Future Generation has earned a reputation for raising serious money, seriously quickly for social good, Wilson believes the model has further to run in Australia.
Four years after Future Generation was launched, investment banking heavyweights Matthew Grounds and Guy Fowler established Hearts & Minds Investments, a high conviction equities fund that has raised $54 million for medical research to date. Wilson sits on its board.
More recently, former Sunsuper portfolio manager Laurence Marshbaum founded the Community Capital Credit Fund, with all management fees donated to early-stage social purpose organisations.
Wilson believes the model could be expanded into yet more asset classes, such as real estate or private equity. This would help the government sail past its goal of doubling philanthropy by 2030.
Caroline Gurney says the percentage of everyday Australians who give has dropped dramatically in recent years. “Things are likely to deteriorate as cost-of-living pressures continue to build. So, at a time when not-for-profits need our support more than ever, most Australians just can’t afford to be generous,” she says.
“I truly believe that the Future Generation model, which allows investors to both give and get a return, will revolutionise philanthropy in Australia.”