Wealth Managers Help Investors Follow Their Passions and Turn a Profit

As high-net-worth investors look to combine returns with nonfinancial gain, big banks and other firms are broadening their offerings.


Making money doesn’t have to be boring, and supporting one’s passions needn’t come at huge financial cost. From public policy to film and theater, individual investors increasingly want to put money to work in ways that benefit their wallet and support their nonfinancial interests. As a result, private wealth advisers are looking to offer strategies that can achieve the double bottom line of profit and social or experiential gain. Investing according to personal interests or values isn’t new, but investors are becoming more sophisticated and their options more varied, with a true focus on performance and returns.

In December, Bank of America Merrill Lynch, which has $1.8 trillion in client assets and some 14,000 financial advisers, announced that it had raised $13.5 million for a so-called social impact bond that aims to reduce recidivism among prison inmates. The largest social impact offering to date, the note was developed with Social Finance, a Boston-based nonprofit, and New York State. It will finance a five-and-a-half-year program that provides employment services to 2,000 ex-convicts. If states can shrink the number of people who land back in prison, they could realize big savings; in 2012 alone, New York spent $3.6 billion on corrections. Investors in the BofA Merrill security are paid based on how much less time program participants spend behind bars compared with a control group and on transitional and long-term employment results.

Liam O’Neil, head of the markets group at Merrill Lynch Global Wealth and Investment Management, says his team kept return expectations low when raising capital: Investors can hope to make between 5 and 6 percent a year. “This is a bridge between capital markets and philanthropy,” O’Neil explains.

The deal was “the first time a social impact bond has been implemented through a wealth manager,” notes Social Finance co-founder and CEO Tracy Palandjian. Raising money for impact deals via private wealth is “a highly marketable and sustainable approach,” she adds. Investors are split almost evenly between individuals and foundations or endowments; they include former U.S. Treasury secretary Lawrence Summers, Utah businessman James Lee Sorenson and the New York–based Robin Hood and Rockefeller foundations. John and Laura Arnold, the oil trader–turned–hedge fund manager and his wife, invested $4 million through their foundation. “We are interested in the tool itself” because it can develop innovative solutions to social problems and influence public policy, says Joshua McGee, vice president of public accountability for the foundation.

BofA Merrill’s internal research shows that 45 percent of high-net-worth investors want to both achieve returns and drive social change. Credit Suisse Group, Deutsche Bank and JPMorgan Chase & Co. are among the other major banks with big private client networks that are developing investments focused on environmental, social and governance (ESG) issues. Last October, Credit Suisse launched the Credit Suisse LGBT Equality Index, an investable index of LGBT-friendly companies that it’s marketing through its private bank.

Fun is also undergoing an investment makeover. The lure of nonfinancial perks has drawn plenty of investors to Hollywood, and the film industry has been happy to take their money without always worrying about how much it gives back. In Los Angeles in 2012, ex–venture capitalist Wade Bradley launched Media Society, which uses slate financing — backing a group of movies to offset risk — to target blockbusters, giving ultra-high-net-worth individuals a shot at film investing while respecting their need for returns. Participants can spend time on the set and walk the red carpet. Media Society has sold just over half of the units in a slate totaling $70 million. Not all of Bradley’s deals have gone smoothly, though. Knights of Badassdom, a fantasy action comedy backed by clients of IndieVest, a predecessor to Media Society, was delayed until this January. But Bradley is branching out into theater: He and his investors backed the musical First Date, which just finished a six-month, $10 million run on Broadway (see also “Oscar-Winning Director Costa-Gavras Skewers Finance”). • •


Get more on investors.