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Prudential Financial, Inc., Ballmer family, and Kresge Foundation invest in largest U.S. pay-for-success fund to date

Human Services, Social Investment Practice

 

Prudential Financial, Inc., Steve and Connie Ballmer, and The Kresge Foundation today announced $40 million in investment commitments to The Community Outcomes Fund, a fund to scale pay-for-success (P4S) investments in the United States.

The fund, which is being raised and managed by New York-based Maycomb Capital, matches private capital with local priorities and public-sector agencies – such as states, public departments or counties – to invest in social and health services that produce measurable outcomes and deliver financial returns to investors. In the process, the fund also helps align government resources with evidence-based solutions to social challenges.

To date, the fund has raised $30 million in cash commitments from Prudential and Steve and Connie Ballmer. Kresge will support the fund with a loan guarantee of up to $10 million, which provides limited credit protection to Limited Partner (Class A) investors in the fund. The fully raised fund is expected to be $75 million.

“Pay-for-success financing enables government to target resources to programs that work,” said Steve Ballmer, co-founder of Ballmer Group. “This is a great way to help ensure every child and family has an equal chance to achieve economic mobility.”

Prudential continues to be a leading institution in the support of pay-for-success projects that provide evidence-based services to underserved markets and lead to meaningful, positive outcomes. In addition to The Community Outcomes Fund, the company has also supported research and development efforts to help apply the pay for success model to new interventions, service providers and markets.

“Prudential believes everyone should have the opportunity to achieve financial security, and as such, we look forward to scaling promising pay for success projects to reach more underserved communities,” said Miljana Vujosevic, vice president of impact investments at Prudential. “We are eager to support pay-for-success projects that have a proven track record of tackling intractable social problems to improve people’s lives across the U.S.”

When fully raised, the fund will enable Maycomb to provide the bulk of senior capital needed in any deal to increase efficiency. In doing so, Maycomb will have the leverage needed to ensure that structuring and negotiations are more efficient and that best practices from early-stage pay-for-success transactions are incorporated.

Andrea Phillips launched Maycomb Capital in 2016 after a decades-long career in community finance. The Community Outcomes Fund’s first investment is in the Massachusetts Pathways to Economic Advancement initiative. With service provided by Jewish Vocational Services, this project delivers English language classes and employment services assistance to approximately 2,000 limited-English speaking adults in Greater Boston, to help them progress up the economic ladder.

To date, the U.S. has seen 18 pay-for-success projects launch, through which lessons have emerged about how to successfully structure a P4S program.

The Kresge Foundation’s Social Investment Practice has a $350 million commitment to social investments – including loans, equity investments and guarantees, such as in this investment – that work to expand opportunity in America’s cities. Its Human Services team works to support the advancement of human services to accelerate social and economic mobility for people with low income in America’s cities.

“Outcomes-based financing has the opportunity to scale effective social and environmental interventions and align the interests of government and providers,” said Kimberlee Cornett, managing director of Social Investment Practice at Kresge. “This fund will reduce complexity and increase efficiency to bring additional transactions to market, condense the time required to structure a transaction, and aid evaluation both within individual transactions, as well as at a field level. We hope the fund proves to be an important vehicle in this emerging field.”

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