FROM INTENTION TO ACTION: GETTING STARTED IN MISSION INVESTING

KRISTIN HULL

Overview

Context and background Creating a plan to get started How we do it Our portfolio What’s next

Context and background

Progressive, socially minded family with strong philanthropic interests

Separate vehicles for family office (internally managed) and family foundation

Family background in financial services and investing Early stage of development of shared mission and vision for

family foundation Interest in expressing values and driving impact through

investing, but hard to get started Difficult finding an entry point Sense that needed a clearly defined shared mission and vision for

the foundation before getting started

Step 1: Flesh out goals and parameters

•Discuss financial targets and requirements both absolutely and relative to rest of the portfolio

•Liquidity•Duration•Return expectations/ benchmarks

•Determine key social priorities

•Issues•Geographies

•Identify operational priorities

•Hands on vs. hands off for the family and Matlock•Direct vs. through managers and funds

Step 2: Develop strategy•Allocation - how much over which period of time from which buckets•Goals - what are financial goals, liquidity needs, and key risk parameters for the allocation and as a part of the overall portfolio•Process - Who will be involved in which ways? How will the “team” function to implement the strategy, deploy the capital, and manage the portfolio•Staging - How will capital be drawn as part of the target allocation? Is a near term cash management solution required? Or will existing positions be liquidated only as new investments are made?•Initial targets - identify some quick wins - some investments that can be pursued and executed quickly

Step 3: Implement•Proceed with execution of initial targets identified in strategy development session•Create expanded “short” list of managers and offerings for market-based opportunities•Conduct outreach and (when appropriate) structure for mission-driven opportunities•Support diligence, manager selection, transaction structuring, and execution as desired

Produce illustrative inventory of potential products and managers to support strategy development

Process we used

Getting started

Use mission investing to help support development of foundation mission and vision rather than wait for vision before getting started

Begin with foundation assets vs. family office… …but have context of overall asset allocation across the two

buckets Focus on fixed income

Expectation of future contribution allow for target of capital preservation {this turned out to be a good asset allocation bet)

Tax efficiency Robust set of opportunities Good way to get started, get early feedback, and preserve option

value (vs. real estates or venture capital)

Concept

Diversified pool of deep impact investment opportunities Return target is inflation + 1% (preserve real giving

power) Weighted towards self-liquidating instruments (loans;

debt funds) with a smaller proportion of illiquid instruments with high impact leverage

Approved Allocation

- 7 -

Liquidity: Pool of highly liquid, secure, market-rate, mission investments designed to generate impact while preserving liquidity for foundation check-writing

Core: Professionally managed, market-rate portfolio benchmarked to commercial standards (e.g. Lehman agg) - diversified, flexible exposure to areas of interest

Private Placements: Opportunity to invest more narrowly in high impact opportunities of interest

Direct: Most targeted - direct loans to groups with strong mission fit

$1-3 MM depending on anticipated liquidity need

$10-14 MM in a separate managed account

$3-5 MM: 4-6 transactions at $500k - $1 MM

$750k-$1.5 MM: 2-4 transactions at $250k-500k

Portfolio Element Target AllocationSafer

More liquid

RiskierLess liquid

Where we are

Approval to invest foundation in 100% mission fixed income $11.5 MM in new mission investments made ($12.8 MM approved)

across issues including: Independent progressive media Affordable housing Green jobs

Balance of “uninvested” funds are still driving mission impact at ShoreBank

Voted proxies for broader family office holdings

Hull Family Foundation is 100% invested in mission – in the process of investing mission deposits in more direct deals across impact

areas and geographies

Our portfolio

Invested/executed Community Capital Management: $10 MM managed, “green” community bond

separate account One California: $1 MM insured deposit Public Radio Capital: $250,000, 3 years at 3% Habitat for Humanity: $246,000, 7 years at 5% to support home ownership for deeply

disadvantaged families Proxy Voting: Voted proxies on 100+ companies in Savant portfolios ShoreBank

Committed BRAC Africa: $1 MM investment in 4 year 8% notes to fund African expansion of

leader microfinance organization

What’s next?

Pipeline transactions under review Root Capital: Finance for fair trade coops in the developing world Blue Orchard: Leading lender to MFI’s Barefoot Power: Working capital for solar lantern company serving

East Africa Renewable Funding: Mezzanine line for household solar and energy

efficiency finance company

Expand beyond fixed income and beyond the foundation Family office? Social venture capital?