Must Reads at a Glance — Impact Investing Benchmark Edition

Welcome to Fundie’s first article in our new series Must Reads at a Glance.

In this series of articles, we will be summarizing the most important research and papers available covering all aspects of impact investing and social entrepreneurship, so you can learn the highlights of these pieces at a glance.

Today, we will be covering the Impact Investing Benchmark by Cambridge Associates and the Global Impact Investing Network (GIIN).

Quickly, what is the Impact Investing Benchmark?

It is a research collaboration between Cambridge Associates and the GIIN’s from 2015 that aims to create a complete analysis of the financial performance of market rate private equity and venture capital impact investing funds.

To do so, they presented a 25-page research paper that creates and then analyses benchmarks for the performance of market rate private investment funds in the impact investing space. The latter benchmarks pursue a range of social impact objectives, operate across geographies and sectors and had a vintage of 1998 to 2010 (For investment newcomers, “vintage year” is a term copied from the world of wine used to describe when a venture capital or private equity firm first invests in a company or project).

Here are the most important conclusions you should take away about market rate private investment funds from this report:

General

The impact investing funds tend to be:

Small — 27 of the 51 funds analysed raised less than $50 million.

New — over two-thirds of the funds analyzed have a vintage year of 2005 or later.

Sectors

The investment funds tend to be focused on financial services — over one-quarter of impact fund capital analysed fell into this sector.

Geographically

Emerging markets are the most represented, especially in Africa. While only 11 funds in the impact investing sample have an exclusive focus on Africa, these constitute over 50% of the total capital being analysed.

Performance

Funds in the vintage years of 1998 to 2004 performed in line with, or better than, funds in the comparative universe, while funds with vintage years of 2005 to 2010 have lagged.

Size

Smaller impact investments (under $100 million) launched from 1998 to 2010 posted a 9.5% IRR and outperformed similar-sized funds in the comparative universe.

Are there any papers that you want to see as part of these series? We’d be happy to add other reports to our list, so comment below or drop us a note at info@fundie.ventures with your suggestions.

If you are interested in learning more, visit us at Fundie!