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Wealth

Impact investing: Donor-advised funds

Kathy Merchant is president and chief executive of the Greater Cincinnati Foundation, one of some 700 community foundations in the US. Like most community foundations it offers a donor-advised fund product – pools in which local individuals and families invest as part of their federal tax-deductible charitable-giving allowance. The funds are invested in balanced portfolios, and the donors can ask the community foundation to make grants to non-profit organizations when they wish. Four years ago, Merchant started looking at social-impact investing as part of the foundation’s overall community investment strategy. "The idea was that you can make a grant, and then the money is gone, but we have a lot of creative and entrepreneurial people in Cincinnati, so we thought it would be attractive to look for opportunities where they could perhaps make a loan or invest in a local enterprise."

After making several loans and equity investments using its endowment funds, in August last year the foundation began to offer social-impact investing to donor-advised funds. Merchant says that current and pipeline investments total $10 million of the $425 million in assets held by the foundation.

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