MICROCAPITAL STORY: M.J. Murdock Charitable Trust Awards Global Partnerships in the United States with a $180,000 Capacity-Building Grant to Expand Its Microfinance Investment Funds

Global Partnerships (GP), a Seattle non-profit organization founded in 1994 that funds microfinance institutions (MFIs) in Latin America, has received a USD 180,000 grant to help manage its loan funds. The three-year grant comes from the M.J. Murdock Charitable Trust, a private grantmaking foundation for the Pacific Northwest based in Vancouver, Washington and established in 1975. As of 2007, GP has fund assets worth USD 10.5 million whereas the Murdock Trust had USD 892 million in assets. As stated in GP’s press release, elements of the grant-supported project will include building GP’s staff capacity to manage the growth of its funds, broadening GP’s base of investors, and creating a knowledge management system to manage and analyze fund data. This project is part of GP’s greater objective to augment management of its three investment funds and improve its management and tracking of fund data. Moreover, GP plans to expand into Mexico this summer, its eighth country. As stated on the Murdock Trust’s website, the grant will primarily be used to hire a new director of investment operations to manage GP’s microfinance investment programs.

A GP spokeswoman stated that the non-profit is currently raising capital for its fourth loan fund, which is targeted to be between USD 15 million and USD 25 million. To date, GP has three investment funds, called Global Partnerships Microfinance Fund (GPMFF) 2005, 2006, and 2008. According to its MIX Market profile, the Global Partnerships Microfinance Family of Funds issues senior and subordinated notes to accredited investors. Using the capital raised from the issuance of the notes, the Funds extend unsecured term loans to qualified and selected microfinance institutions in Latin America. These institutions, in turn, extend microcredit loans to low-income entrepreneurs.

GPMFF 2005 is a USD 2.0 million fund. It is composed of USD 200,000 in philanthropic capital as equity leveraged 10 times by USD 1.8 million in private capital from qualified individual and institutional investors. This fund is currently invested in eight partners in four Latin American countries. GPMFF 2006 has USD 8.5 million in its fund. It is composed of USD 255,000 in philanthropic capital as equity leveraged at a ratio of 32 to one by USD 8,245,000 in debt capital from individual and institutional investors. This fund closed in March 2007 and was disbursed to 14 MFI partners in six countries. GPMF 2008 is a USD 20 million fund. It consists of USD 1.5 million in philanthropic capital as equity leveraged by USD 18.5 million in investment capital from individual and institutional investors. This fund closed in November 2008 and had more than 30 partners in eight countries. Refer to this MicroCapital story for coverage on GP’s launch of its third investment fund. To read more MicroCapital coverage on the Global Partnerships Microfinance Fund and its recent investments, please refer here.

As of September 2007, Global Partnerships had fund assets worth USD 10.0 million allocated to its microfinance investments and 18 active microfinance investments according to the MIX Market, the microfinance information clearinghouse. According to its website, GP relies on charitable contributions to support its operations and programs, which include identifying, screening and monitoring partnering MFIs. Investment capital sourced from institutions and accredited investors are used to provide loans to its MFI partners through its Microfinance Funds. As of the fiscal year 2008, it had USD 34.3 million in capital. In its 2008 annual report, GP reported USD 7.6 million in revenues and USD 5.6 million in expenses. GP, not accounting for its funds, had a net asset balance of USD 4.8 million. Some of its microfinance partners include AMC de RL, Enlace, Apoyo Integral, BANCOVELO, and F.J. Nieborowski, to name a few. Its largest donors, donating at least USD 150,000, include Alaska Air Group, Inc., Orrick, Herrington & Sutcliffe LLP, Matthew G. Norton Co., McKinstry Company Charitable Foundation, and Meisenbach Capital Management.

The Murdock Trust focuses on grantmaking programs in the Pacific Northwest, which includes the states Alaska, Idaho, Montana, Oregon, and Washington. Melvin J. (Jack) Murdock, co-founder of Tektronix, Inc. founded the Trust, and named three Trustees in his will to implement its directives by establishing a charitable trust. The three named Trustees were Paul L. Boley, James B. Castles, and Walter P. Dyke. The organization has historically provided grants in the areas of scientific research, health and human services, education, and arts and culture. About half of the grants awarded are for capital projects, and the other half are for program initiation, expansion, or for increased organizational capacity. Moreover, the Trust had USD 520.1 million in grants awarded.

As stated in its most recent 2007 annual report, M.J. Murdock Charitable Trust uses a long-term investment strategy that focuses on total return using “best of breed” outside investment managers. The Trust divides its investments into three “risk buckets” that are low, medium, and high. The low risk bucket focuses on capital preservation, medium is for equities and value-added real estate, while high is alternative investments that may include buyouts and international private equity. According to the 2007 annual report, the asset allocation was 18 percent for the low risk bucket, 51 percent for the medium, and 31 percent for the high risk bucket.