Fund managers to double impact investments in 2016


Fund managers engaged in impact investing expect capital raised to almost double this year compared to 2015, according to a report from the Global Impact Investing Network sponsored by JP Morgan.

The sample questioned for its Impact Investing Survey anticipates raising $12.4bn (£8.5bn) in 2016, compared to $6.7bn last year. At year end 2015, respondents, which also included other types of investors, managed more than $77.4bn in impact assets, with fund managers accounting for $44.8bn of that.

Impact investment emerged as a term around the time the global financial crisis hit, and refers to investments that have an explicit mandate to achieve social or environmental good as well as delivering financial return.

The annual report interviewed foundations, banks, pension funds and family offices about their activity in the space, finding 90 per cent of respondents thought financial performance was in line with or above expectations.

In addition, 59 per cent expected risk-adjusted market rate returns, 16 per cent expected returns closer to capital preservation and the remainder sat in between.

Benchmarks varied significantly between respondents, but included the likes of the S&P 500 and FTSE, as well as niche products like the Symbiotics Microfinance Index. 

Gross return expectations ranged from a 15.1 per cent on average for emerging market equity to 5.4 per cent for developed market debt.

The report also found 99 per cent of respondents said the social or environmental good achieved by their investment was in line with or outperforming their expectations.

In the fund management space, pension funds and insurance companies were the biggest source of capital (28.5 per cent), followed by banks and diversified financial institutions (17.7 per cent) and retail investors (16 per cent). Fund of funds managers accounted for 5.1 per cent of capital.

Looking at the investments, 35 per cent of assets were allocated to private debt, followed by real assets at 25 per cent, and private equity at 17 per cent. Public equity accounted for 9 per cent of assets under management.

When it came to raising capital, 62 per cent of fund managers said demonstrating track record was a significant challenge, while 65 per cent of investors said track record was “very important” for selecting a fund manager.

Several asset managers entered the impact investment space in 2015, including BlackRock, which launched BlackRock Impact in February, and Goldman Sachs Asset Management, which acquired Imprint Capital in July.

According to the research, 90 fund managers managed 434 impact investing funds with two managing 182 funds between them.

Themes favoured by impact investors were financial inclusion, employment generation and health improvement in the social impact space, and renewable energy, energy efficiency and clean technology in the environmental space.