By Brian Baker
More than a year after it was first announced, the Chicago Community Catalyst Fund has not yet hired investment managers who will be charged with finding investment opportunities–mainly loans to existing small businesses–in underserved Chicago neighborhoods.
Even then the rollout will be slow. The fund will deploy its first capital to investment managers over the next six months and funding should reach Chicago businesses in low-income neighborhoods by the end of the year, according to City Treasurer Kurt Summers.
The city expects to allocate $50 million to the fund this year and $25 million in each of the following two years. The money will be managed by professional investors who will have discretion over where investments are made.
“I don’t want a single politician to be responsible for these investment decisions,” Summers said Wednesday.
He spoke Wednesday at the University of Chicago’s Gleacher Center downtown. The talk was part of an ongoing speaker series hosted by the Rustandy Center for Social Sector Innovation and the University of Chicago Institute of Politics.
The treasurer’s office has already heard from 200 to 300 businesses in target neighborhoods that are interested in obtaining financing, according to Summers. He expects loans to reach those businesses later this year.
The fund was established when the City Council approved the 2017 budget and the city committed $100 million from its investment portfolio earnings to the fund.
“By generating new investment that reaches every neighborhood we can create an even brighter future for all of Chicago,” Mayor Rahm Emanuel said in September.
The fund is the brainchild of Summers, who said one of the main complaints he’s heard from residents was a lack of access to capital. Summers grew up on the South Side before attending Washington University in St. Louis and Harvard Business School.
In addition to the money provided by the city, the fund is seeking to raise additional capital from private and institutional investors. Summers wouldn’t comment on the amount of private money raised so far, but did say about two dozen investors have either committed to or expressed an interest in the fund.
Not everyone is convinced the fund will be a success. Ald. Scott Waguespack, of the 32nd Ward, voted against the fund’s establishment and continues to have reservations about its oversight.
“It’s a nice PR piece, but for me it’s problematic,” Waguespack said in an interview. “The money could be spent anywhere.”
Despite the fund’s clear social mission, Summers says the fund will be expected to earn a return consistent with the overall portfolio.
“This isn’t just socially responsible stuff,” he said. “This is an investment strategy.”