Tools & Resources

Mission-Aligned Custom Public Equity Portfolio

This case example appeared originally in Essentials of Impact Investing: A Guide for Small-Staffed Foundations
Investor: Boone Family Foundation
Investee: Nelson Capital Management
Asset Class:Public Equity - Customized Fund
Investment Amount: $6 million
Impact Sector(s): Community & Economic Development; Human & Social Services
Date of Investment: 2012
Projected Exit: N/A
Financial Return Goal: Market Rate
 
The Boone Family Foundation was established in 2007. It promotes gender equity, better quality of life for children, and environmental stewardship, predominantly in Texas. The foundation has one full-time and one part-time staff member, as well as support from two investment professionals who work full time for the family office. It works with a fully balanced portfolio consisting of equity, bonds, hedge funds, and real estate. When the foundation was in its formative stages, it became inspired by the Annie E. Casey Foundation’s challenge to foundations to invest more endowment dollars for their mission. Currently, the Boone Family Foundation has approximately 9 percent of its endowment committed to impact investments. It is committed to growing this share to 12 percent in the near term.
 
The Boone Family Foundation was seeking potential public equity investments for its portfolio when it was introduced to Wells Fargo-owned Nelson Capital, a third-party investment manager focused on socially responsible investment strategies. Nelson Capital created a custom portfolio for the Boone Family Foundation using mutually agreed-upon ESG screening criteria and broad-based macro trends to invest only in publicly traded companies that behave in ways that are consistent with two of the foundation’s focus areas: advancing gender equity and improving the quality of life for children. Examples of screeningcriteria include: the company being ranked among Fortune’s “100 Best Companies to Work For,” the number of women serving on its board, the number of women at the company who are in leadership positions, its level of participation in philanthropic activities, its health-care packages, the extent to which company practices are conducive for women with children, the presence of on-site child-care facilities, and the company’s role in supporting primary and secondary education.
 
Process
The Boone Family Foundation and Nelson Capital collectively determined the screening criteria. Nelson Capital is responsible for implementing the portfolio, in addition to maintaining the agreed-upon screening guidelines. The foundation monitors and reviews the investment, and it receives monthly performance updates from Nelson Capital.
 
Partners Involved in Investment
Nelson Capital
 
Financial and Social Impact
This investment has earned a 15.87 percent net return since its inception. The foundation has been able to invest in large-cap companies that take actions to support gender equityand improve the quality of life for children while achieving market-rate returns.
 
On-the-Ground Insights
When possible, leverage the family office’s financial and legal resources: Foundation staff members felt fortunate to have the family office’s financial and legal expertise as they began to research MRIs, many of which had structures different from the types of investments they were accustomed to. Handling the due diligence requirements and reviewing contracts and terms amounted to significant time commitments and would have been much more costly had the foundation not had the support and technical expertise provided by members of the family office.
 
Use investment managers as an entry point: Partnering with investment managers is a good way to begin investing for impact. You can ask potential advisors to show how they would integrate the focus areas of the foundation in the investments they make to ensure they will tailor their approach to meet your foundation’s goals.

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