Do donations through mutual funds work?3 min read . Updated: 16 Mar 2017, 08:07 AM IST
If donating is on your agenda, then giving a part of your annual earnings is a good avenue to consider
If you wish to donate a part of your income but didn’t know where to start, then help is at hand. HDFC Asset Management Co. Ltd has launched the third version of HDFC Charity Fund for Cancer Cure (HCC3). Quantum Asset Management Co. Ltd, too, has launched a facility whereby you can donate a part of your annual earnings from its existing schemes.
HCC3 is a roughly 3-year (1,136 days) closed-end scheme. It invests your money in underlying instruments and generates dividends, which are meant to go towards charity. It has a tie-up with the Indian Cancer Society, one of India’s oldest anti-cancer non-government organisation (NGO).
The aim is to donate the dividends declared (either 50% or 100%, depending on what you choose) to the NGO, which will then disburse it. At the end of the scheme’s tenure, the investor gets her capital back.
This scheme’s earlier variants were also of roughly 3 years; the second version is due for maturity. But unlike the previous two versions, which were just debt schemes, this time HDFC AMC is also launching an arbitrage scheme.
The Quantum fund house, instead of launching new schemes, has introduced options in five of its existing schemes, whereby investors in growth and dividend options can donate part of their earnings to charities. The fund house has earmarked six charities that cover causes like skills and job creation, cancer treatment, education, child malnutrition, social services for the poor and Make-A-Wish Foundation of India. Investors can select up to two of these causes. Those who have invested in the growth plan can contribute 5% or 10% of the total value of their folios as on 30 September. The fund house will redeem the units, equivalent to the value plus exit load (if applicable) and pay to the charity. Investors with dividend plans can contribute the higher of two amounts: 75% of dividend declared throughout the year or 5% or 10% of the total portfolio value as of 30 September plus dividend declared in the year.
Both fund houses have put in place processes that ensure your money reaches the right target. For instance, Indian Cancer Society has a tie-up with 16 hospitals across India from where it receives hundreds of applications. These hospitals follow a due diligence process, and forms of those patients whose chances of survival are reasonable are forwarded to another committee called Governing Advisory Council, which takes a final call. Usha Thorat, former deputy governor of the Reserve Bank of India is the chairperson of this council, and Milind Barve, chief executive officer of HDFC AMC, is also a part of it. Once the council finalizes the candidates, money is released to the Society. “The patient is made aware that the money has been sent to the hospital so that the treatment can start on time," said Barve. Quantum AMC follows a similar due diligence approach. HelpYourNGO Foundation, a separate arm of Quantum AMC’s sponsor, aims to regularize donations made to several charities across India. You can choose to change your preference as often as you want, and HelpYourNGO Foundation will put up the progress report on its website about how the money was utilized. The Foundation will deduct 5-10% of processing fee from the amount you donate. You will get a Section 80G certificate for the entire amount you donate.
HCC3 is a new scheme and doesn’t come with a track record. But to be fair, the first two versions of this closed-end scheme did well. The first scheme returned 9.34%, as opposed to 8.96% that short-term bonds gave on an average. The second scheme returned 9.28% against a category average return of 9.39%, but the category also includes aggressively managed funds that take credit calls, which HDFC’s cancer cure funds don’t.
In addition to channelizing and ensuring that your money reaches the right hands, these avenues can generate a handsome corpus to be donated. HDFC AMC generated about Rs12 crore from its first scheme and about Rs22.22 crore from the second scheme (the last contribution tranche at the end of this month, when the scheme winds up, will be added to this kitty). In addition, HDFC AMC has contributed Rs25.25 crore from its side as part of the second tranche. In HCC3, it has committed to donate Rs15 crore every year for the next 3 years. Don’t expect HCC3 to make any money for you, if you have chosen the 100% dividend option. But if giving is on your agenda, this is a good avenue to consider.
Quantum AMC’s schemes are well managed and the donation facility is designed to make money for you as well as the chosen charity. If the cause is appealing, this one works as well.