Prudential Foundation Joins Donors Pool $40 Million to Light a Fire Under Pay-for-Success Programs
A group of donors has created a $40 million pay-for-success fund they hope will provide a nudge to a stalled form of social investing.
The Community Outcomes Fund was started by $20 million in cash from former Microsoft chief executive Steve Ballmer and his wife, Connie, and $10 million from Prudential Financial. The Kresge Foundation will provide up to $10 million to shield investors from losses.
Kimberlee Cornett, managing director of Kresge’s social-investment practice, is confident the fund will achieve its goal of raising $75 million by attracting other investors who want to achieve social gains while scoring a financial return.
"You have a high-net-worth family, an experienced institutional investor with a social mission, and a philanthropy that’s bringing some risk protection," she said. "That constellation of partners is the right thing to kick this off."
In a pay-for-success deal, private investors put money into efforts usually paid for by the government, like early-childhood education, criminal justice, or work-force development. If all goes right, the investors support novel approaches to measure and address social problems. The goal is to meet previously negotiated outcomes, like a reduction in recidivism or increased employment, at a net savings to taxpayers. The process is intended to reduce the government’s budgetary load, allowing it to give part of the savings to investors.