Financial planners have an opportunity to speak with clients about the dual goals of good investment returns and philanthropy with the launch of Australia’s first listed philanthropic wealth creation vehicles.

The Future Generation Global Investment Company has launched two listed investment companies, one focusing on Australian equities and the other on global equities that donate 1 per cent of net tangible assets to charities.

This is possible because the underlying fund managers, and most other service providers including the ASX, are giving their services pro bono. There are no investment management fees or performance fees.

The concept is the brainchild of funds manager Geoff Wilson, who says it reflects a partnership between the greater finance industry and charities.

“This is a perpetual gift from the finance industry to these charities,” Wilson says.

Co-chief executive of the company, Chris Donohue, says he has been blown away by the generosity of fund managers in waiving their fees.

A universe of 92 managers was whittled down to the 15 best performers who were asked to give $50 million in capital and waive their fees. Of the 15 that were approached, 12 said yes.

“It has been incredible the amount of generosity out there,” Donohue says.

Fees being waived

As an indication of the fees being waived, the 17 managers in the global are offering on average, have management fees of 1.3 per cent and performance fees of 16.1 per cent.

The first LIC raised $200 million and the second is on track to reach its goal of $500 million, and the 1 per cent net tangible assets donation to charities will make the company the biggest donor to mental health in Australia, after the government.

Each shareholder can choose to direct their pro rata 1 per cent of net tangible assets to a charity from a list of 19 that have been pre-approved by the board, chaired by Belinda Hutchinson, and that specialise in mental health. These include Beyond Blue and the Butterfly Foundation.

Shareholders that have more than one million shares will also be able to choose to donate their share to a charity of their choice.

Dividends

The listed investment companies will eventually produce a fully-franked dividend and shareholders will be offered the chance to also donate that dividend to the charities.

FGX, which invests in the Australian market, has 16 underlying funds managers, and FGG, the global equities version, has 17 funds managers including Magellan Asset Management, Nikko Asset Management and Neuberger Berman.

Both vehicles donate 1 per cent of net tangible assets to charities, the first specialising in supporting children at risk, and the second focusing on young Australians affected by mental illness. Wilson says in deciding where to focus the charitable donations, he was motivated by the work of his wife and daughter who are passionate about improving the lives of homeless children.

The investment committee, which includes Amanda Gillespie, joint chief executive of Lonsec Fiscal, Aman Ramrakha executive manager of Commonwealth Bank, and Wilson, will decide on the portfolio construction and manager mix of the LICs.

Louise Walsh, former chief executive of Philanthropy Australia is co-chief executive alongside Donohue. She says in the selection process the charities were asked to give five year proposals and the board has the discretion to add or drop a not-for-profit from the list.

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