An investment fund where someone other than the investor gets the returns

A new fund from Nikko Asset Management may well be the ultimate gift to others.

Saturday, October 16th 2021, 1:02PM 2 Comments

Nikko has launched the NZ Freedom Fund where it charges no investment management fees and the returns made by the fund are all donated directly to a charity - Tearfund NZ.

In a nutshell the manager and investors get nothing, and the charity benefits.

The fund is an actively-managed PIE fund with a target annual return of around 2%.

Nikko has selected Tearfund for its work countering modern slavery.

Nikko AM managing director George Carter says the choice to support Tearfund was influenced partly by Nikko being part of a global family, but also as the extent, prevalence and proximity of modern slavery is not widely recognised here in New Zealand.

There are an estimated 40 million victims of slavery in the world today, and over two-thirds of these are in the Asia Pacific area. It says 25 million of these victims are in forced labour, so as consumers we can quite easily become unwitting beneficiaries of exploitation.

Carter says the aim is to have more than $3 million invested in the fund in the first couple of years.

At a 2% return that would generate more than $60,000 a year for TearFund. Its immediate target is to generate income of around $50,000 annually – which would be enough to cover the cost of carrying out investigations on suspected cases of sexual exploitation, leading to the arrest and prosecution of offenders.

The returns from the fund are treated as donations and therefore exempt from tax, and Nikko AM and its service providers covering the operating costs and donating their management fees, 100% of the returns generated can be donated directly to Tearfund NZ.

“This unique structure makes it the most efficient way of generating charitable donations from invested capital, meaning more money ends up being used for good,” Carter says.

Carter says the fund is timely as the global pandemic has shifted the focus away from supporting charities and the important work they do.

“Traditionally, charitable financial support has relied solely on people or businesses giving their money away. By allowing us to employ our investment expertise to use some of their savings or capital to generate income, we’re providing a new option for them to donate without donating, while still being able to access their money at any time.”

“We hope the fund will have wide appeal. However, we think it may be of particular interest to philanthropic investors, trusts and businesses seeking to continue their commitment to positive social impact in these challenging times.”

Freedom Fund investors have the flexibility to withdraw their money at any time and are not locked into a fixed term investment.

Nikko AM is operating the fund entirely free of set-up, administrative or management fees, and under a highly efficient tax structure, the amount of charitable donation generated is far greater than would be possible through any other type of fund set up.
“In the simplest terms, this means the charity will receive maximum returns from the capital, with no one clipping the ticket along the way.”

Tags: George Carter Nikko AM Philantrophy