Impact investors that target market-rate returns can achieve them, according to a study published today.
“Evidence on the Financial Performance of Impact Investments” from the US-based Global Impact Investing Network (GIIN) found that across private market strategies – private equity, fixed income and real assets – the distribution of impact investing fund returns is similar to analogous conventional markets.
The impact themes pursued by fund managers in the survey included financial inclusion, access to clean energy, sustainable timber, and low-income housing.
The study also found that, as in conventional markets, performance varies from one fund to the next, indicating that fund manager selection is key to achieving strong returns.
In addition, the study found, impact investors often take a portfolio approach to building an impact investment strategy across multiple asset classes in order to meet their overall risk/return preferences.
However, the study pointed out, not all impact investments seek to achieve market rates of return as some impact investors intentionally target below-market returns given the nature of their strategies.
“Increased transparency around financial performance will enable current players to make more informed portfolio allocation decisions, allow new players to more confidently develop market entry strategies, and allow both to set well-informed performance expectations and more accurately evaluate performance,” said GIIN research director Abhilash Mudaliar.
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