Impact Fund
Hi,
Does anyone have had any experience with the impact funds? (KKR, Bain, TPG, Hamilton Lane, LGT Impact etc.). Curious to understand recruiting process, experience & exposure, exit, business school's perception, how different it is to LBO / growth equity style etc. Any input would be helpful.
"The social impact strategy may grow to more than $300 billion by 2020, a small part of the $2.9 trillion expected to be overseen by private equity firms globally, according to a report by consultancy McKinsey & Co."
Hi! Would you mind dropping a link to your blog?
Also, since you mentioned you worked at an impact fund briefly, what made you decide to join the world of impact and what made you leave it so soon? Did you work at an impact-only fund (Leapfrog), an IFC/government style impact fund, or a traditional asset manager with an impact fund (Bain, TPG, KKR)
Do you have any insight on what the recruiting process for impact funds is from IB? What are your general thoughts on the impact space? Obviously it's growing, but did you feel like what you were doing day-to-day made an actual impact?
Thank you!
I had always intended to do impact investing and intend to return. I ask myself if my work would make my mother/grandmother/father (etc.) proud and I think that if they really knew the full suite of effects of LBO PE, the answer would be no. For impact investing, I think the answer would be yes.
It was earlier stage and I need some hard experience and so I went to a large cap fund.
My fund was impact only with a specific mandate to cover a vertical (e.g., healthcare, inclusive fintech, smallholder agriculture, etc.). That said I know the guys at BCDI and TPG Rise relatively well and could speak to their strategies if of interest - just ask the questions you want to know.
It depends on the fund. I joined my fund through networking (not the calculated outreach often discussed at the firm - I mean getting on the phone periodically and having a thought-sparring partner with someone you're interested in talking with) because my fund was smaller and would not use a headhunter. However, I saw a couple of impact opportunities come onto my plate through headhunters (e.g., Bellcast does BCDI, and they are actually not bad to work with as far as headhunters go).
You didn't ask for advice, but here it is anyway: if I were you, I'd make a list of 20-30 impact firms you want to talk to, email people at all of them in an organized way (e.g., get a CRM or make one in Excel) and by the end of those conversations, you'll have a good sense of where you want to play, and how to get there.
This is far too vague of a question. Let me come back to this later. I can PM you my blog where I talk about a lot of conditions necessary to seeing the impact investment space have "hockey-stick growth" (to use a term I hate, but is apt here).
This is an interesting question because the answer is "it depends". We once invested in a consumer Industry company, and I had a hard time feeling good about the investment because the benefits of a consumer product generally flow to those who can consume the most or consume the quickest. That cohort includes higher income buckets because of a greater likelihood to purchase. So, I felt that investing in a consumer Industry company was an issue, because it would create a bigger gap between wealthy and low-income folks who consumed the product.
I worked for a fund that sought market returns (financial) and so it may not be fair to hold the same yardstick to us as some of our LPs (e.g., Rockefeller Foundation). I used to think that even market return impact funds should have strict impact mandates, but I am starting to think that with such a nascent asset class, it might make sense for these funds to be focused on financial returns so as to make the asset class more enticing to LPs that don't have an impact mandate. Then, once they get their financial returns, they will be more "hooked" / "amenable" to impact investing and allocate more money to impact.
Pretty unique set of circumstances, I wouldn't count on any transition from smaller, early stage funds to the size fund at which I am currently employed.
I'll send you one of the articles I wrote (and the others who have asked, thanks for the interest), it covers this in detail, but for the benefit of the public, these two are diametrically opposed in how they measure impact. TPG uses the Impact Multiple of Money while BCDI generally uses more ad-hoc measurements (believe they have a restaurant or seafood related investment where they capture impact as "reducing in carbon emission during their ownership / increasing sustainability of food supply chain" or something. I've heard that TPG passes along non-impact deals to the general fund, so it's a bit of a cherry picked strategy. As far as I'm aware Bain Cap doesn't have a LMM fund so I think they don't get to cherry pick impact deals the same way.
The point is, IMM looks to measure and predict the social impact generated by linking expected outcomes of business operations to academic research that can quantify the dollar value of the firm's operations into social benefits, whereas BCDI takes more of a "do no harm approach" where they might be reducing the negative externalities that a firm produces upon LBOing that firm.
I think both strategies are fine. I have my own personal preferences. I used to be a real hardo about impact, e.g., "If you're not doing X, Y, Z levels of impact you're not a real impact fund!" type of stance. But to tell you the truth, I think it's much more imperative that we grow the asset class of impact investing in volume and share relative to non-impact investing that I think there's room for "marketing impact" (e.g., impactful enough to sell an impact fund to LPs so you can increase AUM). Who cares if TPG cherry picks deals. If they're able to eek out a 20%+ IRR, then you have a universe of top notch LPs who are amenable to impact and may grow the share of their investments into impact fund managers at the expense of non-impact funds. That's a pretty good outcome in my mind.