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THE KH IMPACT FUND

An Impact Investment Fund for the People of Israel

FAQs – Frequently Asked Questions

As a donor, how do I benefit from contributing to the KH Impact Fund?
The KH Impact Fund offers a new way to give philanthropically. By supporting the fund, you will benefit in the following ways:
• Being part of an innovative, cutting-edge philanthropic endeavor in Israel.
• Taking part in the decision-making process of the investment committee, with a hands-on approach, to maximize the impact and leverage of the Fund for the future of Israel.
• Ensuring your contribution will have a long-term impact through an “evergreen” fund (based on a cycle of reinvesting the capital and returns).
• Getting a donation receipt on the contribution to the fund for tax purposes in countries where donations to endowments are accepted.

As a donor in the Impact Fund, how can I participate?
You are invited to be a member of the Fund’s Investment Committee – together with other donors – to which potential impact investments in Israel will be presented to select from. The committee will convene twice a year to receive reports and align on investments.

What are the ground rules for participating in the KH Impact Investment Committee?
Every contribution of the required minimum of US $50,000 will grant one seat and one vote on the Fund’s Investment Committee (so, for example, a donation of US $200,000 will grant four votes, etc.). This seat and vote are not time limited—they will be valid for as long as the Fund operates (which is not time limited either). Note: The initial fund will be limited to US $1 million, so there will probably not be more than 10–12 members on the Investment Committee (as there will be investments of more than US $50,000). Only contributors will be granted voting rights. After initial investments are made, the Committee will convene once a year in Israel (with the option to participate by phone if needed).

Who is already participating in the KH Impact Fund? In which countries?
Although we are in the initial stages of fundraising for the Fund, we have received commitments and/or expressions of serious interest from Australia, Brazil, Canada, Hong Kong, the Netherlands, Switzerland and the United Kingdom.

How does the Fund select the projects and/or social enterprises to invest in?
Impact investing in general, and “Impact First” (i.e. social) investing in particular, is just starting to develop in Israel (that is partly why the Fund is so exciting). Therefore we have hired Israel’s leading nonprofit organization as a consultancy: Social Finance Israel (SFI). SFI will be responsible for finding potential investments and presenting them to the Investment Committee.

How does the Fund do the due diligence necessary to select the best projects and/or social enterprises?
As we are dealing with social investments (=Impact First), there will not be a full “due diligence” procedure as is required in the financial world. However, SFI will conduct a thorough process of analysis of each proposed investment – and the Investment Committee will meet with the management of each initiative and receive all required information.

How long is the investment cycle?
The portfolio will be diversified. Some returns will happen within 1 year, and we are aiming for firstround reinvestment within 5 years. As in the financial world, the investment cycle varies from investment to investment and among asset classes. As this is a philanthropic initiative, and a leading initiative in Israel, the idea is to be investors of “patient money”, to enable process and long term impact and development.

Is there a size limitation to the total amount in the KH Impact Fund?
The initial fund will be capped at US $1 million, then fundraising for the next Fund will start, to limit the size of the investment committee.

Once I have pledged to contribute to the Impact Fund, when does the actual payment happen? Is there a down-payment? When do I receive my tax receipt as a donor?
At first we will collecting pledges (commitments) to the Fund. Once we reach commitments for US $500,000, we will call in these funds to enable a first round of investments, probably in the first quarter of 2019. A tax receipt from the local campaign will be provided only when funds are actually transferred.

How will the provider (non-profit or social enterprise) report on results and milestones achieved?
Each provider will report quarterly on performance, financials and programmatic impact. SFI will coordinate and provide standard reporting metrics. In addition, the provider will present before the Investment Committee at the annual meeting in Israel (site visits will also be included).

How does the Fund recover the money after an investment cycle? What are the risks that the money might be lost (sunk cost)?
Payments will be made according to the investment agreement by the recipient and added back into the Fund. The risk will be evaluated when considering the investment and mitigated as much as possible.

What is the KH Impact Fund Advisory Board, and who serves on the Advisory Board?
The Fund’s Advisory Board will be made up of people who can provide a unique perspective and advice to the Funds investors and members of the investment committee. These will include veteran impact investors, leading entrepreneurs and philanthropists, and experts in this developing field (impact investment banks), both in Israel and around the world. Once completed, the list of members and their credentials will be available for review.

What is the track record of Social Finance Israel? What has been the ROI on their products?
Impact investing is a new but rapidly growing field in Israel. Several enterprises have been active in this arena, some for several years, with growing government involvement. Some initiatives have already begun to generate returns (such as the Israeli Social Impact Bonds or SIBs), but it is a new field and there is not an extensive track record. Details are available upon request.

How is Social Finance Israel compensated for advising KH on Impact Investing? How do they benefit? What is their fee structure?
We pay SFI a monthly retainer for its consultancy services. This consulting fee is not connected to the Fund’s performance – and is based on a flat fee (negotiated every 12 months) of currently US $2,500. SFI receives no other management or performance fee.

How is the Impact Fund audited?
The existing KH Endowment Fund receives an unqualified annual audit. The KH Impact Fund’s audit will be included in this overall annual audit.