Smarter Money

Billionaires’ Ball: A look at TPG’s $2 billion Rise Fund

Deconstructing the New York Times’ coverage of TPG Growth’s new impact investment fund

Photo credit: Tillman Global Holdings

Talk about raising expectations. The RISE fund scored an Andrew Ross Sorkin exclusive in the New York Times, led by Bono, backed by all-stars on the impact billionaire circuit, and driven by TPG Growth, with more than $8 billion under management.

For all the signals that the big boys are arriving in impact investing, the $2 billion RISE Fund appears to be the biggest, and one of the first to put 10-figure capital behind a solid impact strategy. And there are more billions where that came from, if TPG can really deliver impact “alpha” — market-beating financial returns because of, not in spite of, a savvy impact investment thesis.

The fundraising goals for RISE has apparently doubled since a $1 billion fund was first announced in September. Maya Chorengel of Elevar Equity, which has been tapped by TPG to both develop deal pipeline and raise funds for RISE, has said the day is not far off for a $5 billion fund, once deal tickets and fund sizes can get to the scale needed for big institutional investors. TPG Group en toto manages about $74 billion.

If Sorkin knows the identity of “at least two large pension funds and one sovereign wealth fund (that) have committed nine figure sums” — he’s not saying. (Send tips.)

TPG Growth’s Willian McGlashan

Sorkin and TPG’s William E. McGlashan teamed up to ensure nobody was confused about whether RISE was conceding any returns to deliver impact. Sorkin used an older term, “double-bottom line,” for what has become known as impact investing. He summed up the performance as “mixed results; either investors lost money, or the social impact was negligible or nonexistent.”

Bono himself laid down the gantlet, slamming the rigor of most of impact investing to date. “There is a lazy mindedness that we afford the do-gooders,” Bono told Sorkin. It has become “a lot of bad deals done by good people.”

Early Adopters

It’s not clear whether Bono’s unnamed do-gooders but bad dealmakers includes folks like Jeff Skoll, Pierre Omidyar, Richard Branson, Lynne Benioff, Reid Hoffman and Laurene Powell Jobs, all of whom are board members and investors of RISE. The club is an A-list of the kind of Silicon Valley-based, solution-savvy billionaires who are increasingly committing investment capital — not just philanthropic money — to generate social and environmental value.

Jeff Skoll’s Capricorn Investment Group now manages $5 billion in assets. Capricorn has made big bets on satellite-imagery, healthcare diagnostics and cleantech. Skoll took the lead, with TPG Growth’s McGlashan, to enlist Bridgespan Group consultants to design the impact reporting schema.

Laurene Powell Jobs, the head of the Emerson Collective, one of the new breed of non-foundation impact funds, technically an LLC, which can invest in both for-profit and non-profit organizations. With nearly $20 billion, Powell Jobs is one of the world’s wealthiest women, based on holdings in Apple and Disney built by her late husband, Steve Jobs.

Richard Branson, everybody’s favorite globe-trotting impact billionaire, who has his fingers in everything from the Carbon War Room and the B Team to the all-star human rights advocacy group, the Elders.

Reid Hoffman, a founder of LinkedIn, just acquired by Microsoft for $26 billion, making Hoffman’s stake worth nearly $3 billion. Hoffman is an outspoken provocateur, having pledged $5 million to aid veteran’s if President-elect Donald Trump would release his tax returns.

Mellody Hobson is president of Ariel Investments, the $10 billion fund manager based in Chicago that is one of the country’s largest minority-owned investment firms.

Lynne Benioff, who is building the philanthropic complement to husband Marc Benioff’s platform at Salesforce for advocating corporate responsibility.

Mo Ibrahim, the billionaire founder of Celtel International, which is riding the mobile wave sweeping Africa — an historic infrastructure leapfrog that is a key driver of any emerging market investment thesis as falling prices of connectivity and energy open new customers and new opportunities.

Pierre Omidyar, whose Omidyar Network is one of the earliest LLC’s investing as both a foundation and a venture fund. Since 2004, Omidyar network has invested $1 billion and helped drive much of the research and marketing field-building agenda of the impact-investing community. Omidyar has been a longtime investor in funds managed by Elevar Equity, which has been tapped by Rise.

Elevar, which raised its own $74 million fund last year, has been low-key about its activities. (Maya Chorengel of Elevar lays out a good primer on the firm’s investment thesis in this video panel, which also includes Matt Bannick, head of Omidyar Network.)

Bill Gates was not among the publicly announced list, but folks like Hoffman and Branson are also investors in the Gates-led Breakthrough Energy Coalition. Breakthrough is also pegged as a multi-billion dollar fund and also specifically pegged to meeting specific impact goals, namely, staying below the 2-degree temperature rise limit set by world leaders in the global climate treaty now in force. The Gates Foundation has deployed more than $1 billion in so-called program-related investments in profit-making firms with a clear charitable intent.

Measureable impact

RISE expects to split its money between U.S. and emerging markets. Domestic investments include healthcare, education and clean energy. Emerging market sectors include financial services, housing and education. Rise has created strict metrics to measure social impact and has hired an outside auditor (but will tie fund manager’s compensation only to financial performance, not impact).

The notion of TPG — or Bono, for that matter — rising in as a white knight to rescue impact investing didn’t sit so well with veterans of the movement to shift capital toward social and environmental progress.

Use of a failed social impact bond in New York as an example was the kind of apples-and-oranges benchmark that Sorkin would never have used in “serious” business reporting. That bond was backed by Goldman Sachs at the behest of then-Mayor Michael Bloomberg, but fell short of its goals to reduce the recidivism rate for adolescent offenders at Rikers Island.

Frontier capital

McGlashan cited as an example of the opportunities TPG’s investments in Apollo Tower, a cellphone tower company in Myanmar. TPG began backing Apollo in 2014, before Myanmar emerged from military control. Myanmar went from nearly 0 percent cellphone penetration to 70 percent, accounting for more than 5 percent growth in G.D.P. (Our friends at Unreasonable.is have a good update on Myanmar’s march toward mobile money.)

The company’s value has more than doubled. As for impact? Sorkin vaguely endorses the notion the investment “helped to increase transparency in a country known for tight control of its information, helping the nation take steps toward democracy.” Again, for his serious deal stories, Sorkin would ask for more proof. Interesting tidbit: McGlashan left San Francisco in 2013 and moved to India for a year.

Sorkin didn’t probe deeply on RISE’s investment thesis, but a mashup of Elevar’s approach and the well-documented strategies of Omidyar Network would suggest that it will target emerging middle-class consumers around the world. Importantly, that means families with $10 a day, not the extreme poor with live on under $2 a day. Omidyar laid out the opportunities and risks in “Frontier Capital,” a 2015 report that outlines an approach to investing in businesses serving low- to lower-middle-income people in emerging markets.

Bono tried belatedly to scale back expectations, agreeing to report back in a year or two and “be actually a bit tough on ourselves.” But he also made clear that more is at stake than the success of a single investment fund.

“Capitalism is going up on trial, and I think that it’s clear that putting profit before people is a nonsustainable business model,” Bono told Sorkin. It’s not that capitalism is immoral; it’s amoral. It’s a better servant than master.”


ImpactAlpha has business relations with some of the investors named in this story.