For at least three mutual funds, charity clearly begins at home.
The New Covenant Funds of Columbus, Ohio, with a collective $1.5 billion across four mutual funds, is giving a new push for its so-called "First Fruits" program that allows fund investors to automatically donate capital gains and/or dividends earned on their mutual fund investment accounts to another fund account held by the Presbyterian Foundation, the General Assembly of the Presbyterian Church or their local Presbyterian church. The program encourages both churches and individual parishioners to invest in the funds.
Faithful investors may keep their personal investments, but can gift the earnings, which, in most cases, are designated as tax deductible contributions. Investors must invest at least $5,000 in order to begin directing gifts.
The First Fruits program, originally devised by the Presbyterian Foundation of Jeffersonville, Ind., which is the heart of the Presbyterian Church, has been adapted for the socially responsible and religiously aligned New Covenant Funds. The funds are advised by the investment division of New Covenant Trust, a subsidiary of the Presbyterian Foundation.
The mutual funds were actually borne out the management of endowments for the foundation and other churches. Those assets had been managed within commingled funds until June 1999. The New Covenant Funds were established on July 1, 1999, with assets transferred from the previous accounts. The no-load fund lineup includes one growth fund, one income fund and two fund-of-funds that invest in varying percentages of their sister funds. There is also a money market fund.
All four funds are sub-advised by outside managers. The funds are socially managed and won't invest in companies with ties to tobacco, alcohol, military spending, firearms, gambling and other anti-church principles.
Although the First Fruits program has been available for a few years, the advisor needed to work out some operational kinks to allow the charitable gifting program to move full steam ahead, said George Rue, chief investment officer of the fund group. "The program allows for making gifts to the church. It promotes the idea that people will give something back," he noted.
"These funds provide a good investment and are socially responsible, but also continue to show the link between the foundation and the mutual funds," Rue said. "It's a nice way to keep that connectivity."
Although so far, only 10 individuals have signed up for the First Fruits tithing program, New Covenant is trying to get the word out. It has sent all of its current shareholders a letter explaining the program and has publicized it in a newsletter that goes out nationally to all Presbyterian churches.
The firm has also reached out to the 25 people nationally whose main job is to raise money for local and larger Presbyterian churches by registering them to sell the mutual funds as well. "It was a natural progression to also have them as registered representatives for the mutual funds," Rue added.
For American Century Investments of Kansas City, Mo., the focus has been on donations to The Lance Armstrong Foundation of Austin, Texas, the not-for-profit organization whose mission includes education and advocacy for cancer victims. It was founded in 1997 by seven-time Tour de France winner and cancer survivor Lance Armstrong.
Earlier this year, through an alliance with Armstrong that includes becoming the firm's advertising campaign personality, American Century rebranded five two-year-old time-horizon portfolios formerly known as American Century's MyRetirement Funds under the LiveStrong brand. The LiveStrong name has become synonymous with Armstrong's crusade.
Based upon a formula that American Century declined to publicly disclose, the firm will donate an amount equal to a percentage of the assets invested within those portfolios. That donation, which American Century has guaranteed will be a minimum of $1 million annually, will be donated from the firm's corporate coffers, not from the mutual funds or investor accounts.
The alliance was the brainchild of American Century Founder Jim Stowers, Jr. who, along with his wife Virginia Stowers, are both cancer survivors and founded and endowed the Stowers Institute for Medical Research.
The alliance with Armstrong's foundation and philanthropic commitment serves two purposes, said Mark Killen, senior vice president of corporate and product marketing at the firm. "The product allows investors to save for their most important goals and empowers people" afflicted with cancer, he said. The promised donations to the foundation do encourage investments in the mutual funds, he noted. But many people have also asked how they can privately contribute to the Armstrong Foundation.
To make the new portfolios more accessible and encourage investments, late last month American Century lowered the minimum initial investment from $2,500 to $500 for those willing to automatically invest $100 or more per month until the $2,500 level is reached, Killen added.
The Poor and Needy
The Amana Funds, two funds created to serve the financial needs of Muslims, for the past five years has offered a novel program that allows its mutual fund investors to direct contributions out of their fund accounts to meet their "Zakah" obligation.
Zakah is the amount of money, similar to a tax, that Muslims pay to help those less fortunate, including the poor and needy. Assets above what is necessary for a Muslim family's usual annual living expenses are said to be subject to Zakah and can be paid any time of year, although many choose to pay their obligation during the holy month of Ramadan.
"Zakah is a tax system based on the Qur'an when we didn't have a tax system to support the poor or needy," said Nick Kaiser, president of the Amana Funds. The system hails back to a time when goats and land were wealth. "Now, four countries in the world use Zakah as the basis of their tax system," he added.
Saturna Capital of Bellingham, Wash., manages the Amana Growth Fund and the Amana Income Fund, both of which are managed according to the principles of the Muslim faith as dictated by the Qur'an.
To help investors determine their Zakah obligation, which is voluntary, Saturna calculates an investor's annual gains and losses on combined fund accounts and discount brokerage accounts that Saturna offers, Kaiser explained. Investors can then simply redeem an amount equivalent to what they have calculated to be their Zakah obligation, instruct Saturna to send payment to a specific needy Muslim individual or organization, or even ask that the mutual fund account of another worthy Amana fund investor be credited with the Zakah.
Kaiser said that about 400 of the fund's 10,000 investors take advantage of the program.
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