MRI Helps Restore Historical Artifacts in Minnesota
This case example appeared originally in Essentials of Impact Investing: A Guide for Small-Staffed Foundations
Investor: HRK Foundation
Investee: Minnesota Historical Society
Asset Class: Guarantee - Line of Credit
Investment Amount: $10,000 - $100,000
Impact Sector(s): Arts, Culture & Humanities
Date of Investment: 2006 (with multiple renewals since, most recently in 2013)
Projected Exit: N/A
Financial Return Goal: Market Rate
Investee: Minnesota Historical Society
Asset Class: Guarantee - Line of Credit
Investment Amount: $10,000 - $100,000
Impact Sector(s): Arts, Culture & Humanities
Date of Investment: 2006 (with multiple renewals since, most recently in 2013)
Projected Exit: N/A
Financial Return Goal: Market Rate
HRK Foundation serves Minnesota at large, the Twin Cities (with particular focus on St. Paul), the St. Croix Valley, and northern Wisconsin, specifically in the areas of arts, education, health, and community building (i.e., affordable housing, sustainable agriculture, and cross-sector development). It began to explore impact investing in response to economic downturns in the early 2000s when its capacity for grant making was limited but its desire to generate social impact was not. Through staff engagement with the foundation’s younger generations, the foundation identified impact investing as an important tool to achieve impact. The board realized the potential opportunities it could create for engaging new partners creatively, beyond what grant making can do. The CFO and CIO quickly educated themselves about impact investing, and the foundation currently has 20 percent of its endowment allocated to impact investing. While the board is comfortable taking higher risks and potentially sacrificing returns for social impactthrough PRIs, it expects impact investments made from the endowment to generate market-rate returns.
HRK Foundation staff is part of the family office, providing the foundation with a pool of resources across departments and issue areas including legal, tax, financial, and investment advisors. The foundation has 1.5 dedicated staff members, while nine staff members serve the family office.
Process
The Minnesota Historical Society identifies a potential acquisition (which has been approved by the History Museum’s Accessions Committee) and formally requests a loan from the foundation. HRK Foundation issues the loan within seven days, and the museum submits a repayment plan within a month. Funds to repay this loan are raised by the museum for this purpose after the loan is issued. Due to the unique structure and cross-staffing within the family office, HRK Foundation is able to create these transactions in-house, without co-investors.
Projected Impact
The investments earn the foundation 2 percent interest over a three-year term and help restore priceless historical artifacts to promote education and engagement in local history.
On-The-Ground Insights
Don’t re-create the wheel. At the time the foundation extended the line of credit to the Minnesota Historical Society, two local foundations had recently conducted similar transactions. By sharing resources, the HRK Foundation reduced the amount of time required by lawyers to prepare legal documents.
Know your CDFIs. In the process of reviewing the portfolio for MRIs, the foundation discovered CDFIinvestments as a simple and effective vehicle for investing for impact.
Educate your board. Through a series of conversations with foundation board and trustees, HRK was successful in garnering support and enthusiasm for impact investments. As the foundation began to develop a positive track record with these investments, board support grew, allowing the foundation to take a more proactive approach to its investments and participate in field-building conversations.
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