Tackling a Low-Return Environment with Sweat Equity


We are sharing what we and our partners have been learning through reflection in our Looking Back, Moving Forward blog series. This series is part of our Reflection, Analysis, and Planning (RAP) Process, which the Foundation is engaging in as our Moving the Needle (MTN) 2.0 strategic plan draws to a close and we prepare for what comes next.

Sweaty, tired, and trying to beat impending rain, I ran 10 miles through the Lancaster Hills last Saturday morning. Four months ago, I was struggling to run one minute. So, why does a 57- year-old woman decide to learn to run by signing up for a half marathon? Why embrace such radical change?

This wasn’t something I ever saw myself doing. Thirty years ago, I was able to run a 5K, but I haven’t gone running in years. When I signed up for the race, I wasn’t planning to run it. I was going to walk it. Slowly, I became convinced that I should adopt a training plan and prepare to run. Since early June, I’ve been training–and my first attempts at running were pitiful. I happened to start at Merritt Lake in Oakland, California, where I was humbled by the regular exercisers, a few years older than me, who were lapping me and adding strength training to their loop. Humbling as that was, day by day I tried to run longer, and I eventually found an online training plan. Sticking to the plan alone was tough, though. I was invited to join a group training for a half marathon, and that’s when my commitment took off. Working with a team gave me the encouragement I needed to stay the course. I also learned a great deal: how to run hills without blowing out my knees, how to manage long-run nutrition, and the importance of hydration.  

What does this have to do with foundation investments? WRF has a long history of program-related investments in organizations that align with our mission. These loans have paid below-market returns, but have paid in full. In recent years, we have begun to transition into mission-related investing. Like my transition to running, it isn’t something we dove into. We sought research on returns and advisors with experience. We developed a transition plan that will take years to implement, and we are willing to tweak the plan in response to changing times.

Why would WRF embrace this radical change? Most experts agree that the historic rates of return traditional investments have achieved are going to be difficult to replicate for the foreseeable future. If we can’t expect return ratios that exceed our payout requirements, how can we fund our mission? With a 5 percent payout target, 95 percent of the investments are available for long-term returns. Does it make sense for 95 percent to be invested in areas that contribute to the problems the 5 percent are trying to solve? Answering that question triggered a change in our investment philosophy. Program-related and mission-related investments offer solutions to this quandary.  

I didn’t start with a 10-mile run, and WRF started slowly as well. Choosing a community development financial institution as our depository bank was an easy, low-risk change. As a foundation committed to promoting social justice, insisting that the firms that invest our money share our commitment to racial equity was another relatively simple change. Other changes required more thought and included more risk. Increasing our exposure to alternative asset classes, like private equity with a mission focus, will take seven years to implement well. We are also balancing the added risk by paying close attention to fees using index funds in asset classes where we can help offset some of our risk.   

Like my commitment to a half marathon, our training plan is in place. Our goals are clear, and we aren’t doing this alone–we have a team of advisors and colleagues to help us. How will your foundation address your future investing strategy? Will a commitment to mission permeate your investment strategy as well as your programmatic work?

If I can go from a couch potato to a marathon runner, there is room for mission in your investment strategy.  

Equity Stories

WRF has a long history of program-related investments in organizations that align with our mission. These loans have paid below-market returns, but have paid in full. In recent years, we have ...
Created by
Andrea Dobson
Chief Operating and Financial Officer