Chris Paul, other celebrity athletes, invest for an impact
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[March 20, 2017]
By Elizabeth Dilts
NEW YORK (Reuters) - Giving back to
their communities has always been a challenge for pro athletes who
get rich quick, because they tend to lose the money even more
quickly. But even those who manage to build a substantial amount of
wealth have a hard time using it charitably in a way that truly has
a long-term impact.
Some celebrity athletes are turning to "impact investing," a growing
niche of do-gooder strategies that aim to put money toward
charitable causes but that would otherwise lack support. Fund
managers, of course, also aim to generate income in the process.
The Turner Multifamily Impact Fund, a private-equity style vehicle
focused on preserving affordable housing, has lately drawn financial
support from NBA All Star Chris Paul.
He joins former World No. 1 tennis player Andre Agassi and
Basketball Hall of Famer Magic Johnson, who have invested in other
funds and projects run by the parent company, Turner Impact Capital
and its founder, Bobby Turner. Their contributions work with dollars
from hedge fund billionaire Bill Ackman, the Rockefeller Brothers
Fund and actress Eva Longoria.
In an interview with Reuters, Paul said he was frustrated by the
feeling that giving away his own millions only "put a Band-Aid on a
situation." As a point guard for the Los Angeles Clippers, he has
earned money not just from the 5-year, $107.3 million contract he
signed in 2013, but also from lucrative endorsements for companies
like Nike and State Farm Insurance.
Paul is worth an estimated $30 million, according to Forbes.
"We were doing basketball courts here or there, we'd always do
giveaways during the holidays, and we did 10 computer labs," Paul
said, referring to a few of the projects the Chris Paul Family
Foundation has organized for disadvantaged kids. "But at times,
philanthropy can be frustrating."
Whether impact investing is more successful than pure charitable
giving is unclear.
Unlike simply giving money away, impact investing does provide a
return, which could enable philanthropists to sustain or grow their
charitable giving. But broadly speaking, impact funds have delivered
lower returns than straightforward stock or bond market indexes,
according to data from the Global Impact Investing Network, a trade
The funds also charge higher fees than traditional investment tools
like mutual funds and index funds, because of the amount of work
that goes into the investments, such as scouting apartment complexes
for affordable housing funds.
But impact investing proponents argue that analyzing financial
returns alone is misguided.
That is because they are more concerned with whether their money is
achieving an outcome, like preserving affordable housing in a
gentrifying neighborhood, than whether the investment generates a
certain profit. Around 40 percent of impact investors polled by
Global Impact said they seek below- market returns.
Counter-intuitively, funds that deliver below-market returns may be
the most successful because it indicates they would not otherwise
receive funding, said Paul Brest, a professor at Stanford University
who teaches courses on impact investing.
"That's the sweet spot for impact investing, because by definition,
ordinary investors are not going to invest in that," he said.
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Clippers guard Chris Paul (3) moves the ball up court against New
York Knicks during the second half at Staples Center. Gary A.
Vasquez-USA TODAY Sports/File Photo
Reduced Rent for Services
There were over 400 impact investing funds and products, with $31
billion in committed money, in 2015, the latest year for which data
is available from Global Impact.
Run by former hedge-fund manager Bobby Turner, the Turner
Multifamily Impact Fund launched in 2015 and raised $264 million in
capital. It has so far acquired nine garden-style apartment
complexes on the outskirts of cities like Dallas, Austin and Las
Vegas, according to the fund's website.
"We're trying to give housing to people who make too much money for
subsidized housing but do not make enough for luxury rentals or home
ownership," Turner told Reuters.
The apartments are mostly filled with tenants who earn up to 80
percent of an area's median income, and rent is no more than 35
percent of a tenant's salary.
To make the investment sustainable, Turner said tenant turnover must
be kept low. The fund tries to do that by providing additional
services like community watch groups, free tutoring and on-site
clinics run by other residents who work in law enforcement,
healthcare or education and receive half-price rent for running
At the Turner-owned Regency Pointe Apartments, a cluster of
two-story red brick apartments 10 miles from Washington D.C., the
typical tenant would earn $54,666 a year, according to U.S. Census
data. Rent for a three-bedroom starts at $1,456 a month, according
to the complex's website.
The fund is aiming for 10 to 12 percent returns net of all fees over
the next few years by keeping tenant turnover and insurance costs
low. Turner's firm does not disclose fees, but generally speaking,
industry sources said similar, private equity-style funds typically
charge annual management fees of 1.5 to 2 percent of assets, plus 20
percent of profits.
A benchmark generated by Global Impact Investing Network shows
impact funds generated 5.58 percent returns over 15 years ending
last June. The benchmark underperformed stock and bond market
indexes across all timeframes it measures.
But people involved in the Turner fund said they are less worried
about financial returns than tackling an affordable housing shortage
in big cities.
"In order to really impact change," Paul said, "it costs."
(Reporting By Elizabeth Dilts; Editing by Dan Grebler)
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