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Jewish World Review Sept. 14, 2009 / 25 Elul 5769 Investing charity money in a sure-fire investment By Rabbi Dr. Asher Meir
The sages of the Talmud are trying to find the right balance between risk and return for charity funds – in this case, money belonging to minor orphans and being administered by a court-supervised guardian. Rav Yosef is unwilling to take any risk, and advocates simply disbursing the money. Rabbah is willing to invest only if the investor is willing to personally bear any losses and can actually provide security for potential losses in advance – certainly a very unusual situation. Rav Ashi is the most lenient; he is willing to settle for the case where the investor agrees to bear the losses and appears willing and able to do so. Based on Rav Ashi's opinion, you can go right ahead and invest the money if you can personally cover any losses. Of course you would need the approval of the board of your charity before making such a far-reaching step. However, it is extremely unusual nowadays for a private individual to be willing or even able to personally make good losses of the charity. (If the backer was sure of the quality of the investment it would make much more sense to borrow the money and invest it himself, giving any profits to charity.) So it seems that making even prudent investments could be quite difficult. Later authorities, in response to changing situations, acknowledged that sometimes the requirement for co-signing could be waived, if it made it prohibitively difficult to invest charity funds productively.(2) However, there is still a requirement for careful oversight, expressed in the passage by the need for someone stable, reliable and obedient, and for proper documentation ("deposit it by him in court"). Experience has shown that the only way to do this effectively is by having an investment committee made up of a number of experienced experts who have the best interest of the charity foremost. There is no way for a single individual to exercise the appropriate degree of judgment and knowledge. This is especially true for someone like you, whose judgment would be colored by his involvement in the day-to-day management of the organization. If you believe that the future interests of the organization would be best served by investing its funds in something more risky than a bank account or CD, you should recommend to the board that they establish a properly constituted investment committee for this purpose. Another route: if you are so certain that this investment is a sure thing, you might want to invest your own money and promise to give a certain fraction of the returns to the charity. But experience shows that there is no way to know in advance if any investment is a sure thing.
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JWR contributor Rabbi Dr. Asher Meir, formerly of the Council of Economic Advisers in the Reagan administration, is Research Director of the Business Ethics Center of Jerusalem, Jerusalem College of Technology.
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