UBS wants to foster girls’ education in provincial India with a special type of bond. The project, not uncontroversial, has its roots with the resourceful head of a UBS charitable foundation.
To do good and make money in the process. That's the idea Switzerland’s largest bank is trying to sell to wealthy clients interested in good works. The UBS philanthropic Optimus Foundation has shown itself to be very creative in this regard.
Just a year ago, the UBS foundation financed a so-called development impact bond (DIB) from its own funds. This financial instrument aims to foster girls’ education in the Indian province of Rajasthan, where education infrastructure is lacking. The bond has a special appeal: The more girls who reach their learning targets, the higher the payout for the investor.
The maximum paid out by the charity-bond is 15 per cent – an almost astronomical return in today’s low-interest environment. But the hybrid investment-development model has attracted some controversy, as reported by finews.ch.
Close Ties
Also because the interest is funded by an unlikely partner, the Children’s Investment Fund Foundation (CIFF). The man behind the charitable foundation is one of the most feared hedge fund activists, Christopher «Chris» Hohn, an immensely rich British investor who with his fund, The Children’s Investment Fund (TCI), once forced the head of the German stock market to resign.
A Swiss banking giant and a foundation set up by a professional speculator – an unlikely pair in philanthropy. But the link between them is not accidental, finews.ch has learned.
Joint Fortune Donated
The UBS foundation and CIFF have worked together before. In 2013, CIFF raised $787 million as part of the Global Nutrition for Growth Compact project to combat child malnutrition. Not only were the British and Brazilian governments on board, as reported by «Philanthropy News Digest», but also Optimus Foundation.
At the time the foundation declared a payment of 15 million Swiss francs, with the pledge to raise a further 65 million francs in the following eight years.
The person behind the Optimus pledge was Phyllis Costanza (pictured below). The American with experience in the health and education sectors, as well as in foundation management became CEO of UBS Optimus in 2011, as reported by finews.ch at the time.
Previously, Costanza was director of leverage at CIFF. She also sat on the board there for eight years.
Expensive Divorce
According to philanthropy circles, Costanza established a close friendship with Hohn’s ex-wife Jamie Cooper-Hohn (pictured below). In 2014 the wife of the hedge fund manager made headlines when she was awarded Britain’s biggest ever divorce settlement. Hohn had to part with some half a billion francs, on the grounds that his wife could credibly prove that she had played a significant role in building up the foundation.
Following the divorce, both stopped their payments to the CIFF, although they remained connected to the foundation through their work as trustees, Britain’s «Independent» newspaper reported. In 2015 the foundation was worth $4.4 billion, and therefore a very attractive partner.
Back to UBS Optimus. In the run-up to the launch of its direct investment bond, the foundation had a problem. The partner that was meant to guarantee the interest and the repayment of the bond had dropped out, and needed to be replaced.
«Absolutely No Influence»
«After considering many potential outcome payers, CIFF was chosen,» UBS Optimus head of communications Ian Welle-Skitt told finews.ch. CIFF was selected because of its proven track record and because its goals fitted best with those of UBS.
The fact the CEO Constanza had worked for CIFF however, had «absolutely no influence» on the decision, Welle-Skitt added.
Costanza’s ability to network effectively in the circles of extremely wealthy philanthropists has already been shown in the DIB project.
The idea was actually born at a networking event for the superrich – the UBS Philanthropy Forum, arranged every year in the luxury winter resort of St. Moritz for selected clients of the bank. According to the sector portal «Devex Impact», award-winning campaigner Safeena Husain (pictured below), head of the Indian charity Educate Girls (EG), was invited to speak at the event.
Project with Contrasts
Costanza was «impressed» and immediately enthusiastic about Husain’s education project. She revealed her admiration in a blog post in which she referred to Husain as a «remarkable woman» and has since referred to their cooperation as «not a match made in heaven. It was made in St. Moritz.»
Help for Indian schoolgirls, inspired by a get-together in the alpine idyll of St. Moritz and guaranteed by the assets of a professional speculator – the DIB project is clearly full of contrasts.
The pioneering plan has brought the UBS foundation some attention. In two years, when the bond matures, Costanza and her partners will be able to measure the results.
