Impact Investing - Type of Work/Comp/Hours
Investment banking summer analyst interested in the world of impact investing - what do comp/hours/type of work look like at the elite players like leapfrog investments, TPG Rise, etc. and how does that compare to the philanthropic organizations like the strategic investment fund at the Bill and Melinda Gates Foundation. Equally interested in opportunities at both. Thanks for any information.
At family-led shops the culture is very dependent on the family and what sectors, stages, etc. they like to spend time in. But broadly speaking, the work is not dissimilar to working at a growth PE shop - same elements of sourcing, diligence, execution, portfolio coverage, etc. exist everywhere. I'd say the bar of getting deals past IC is generally higher, since you have to show that the company clears both the returns bar and impact bar. I think unlikely to find a place where you work long-hours because of sweaty culture, but since so many of these places are so leanly staffed you will often end up working more than you expect.
The impact arms of traditional PE shops will likely be similar culture/experience to the MF itself, i.e. I belief Rise and TPG Growth cross-staff. So day-to-day is similar you'll just spend more time looking at assets in education, climate, etc. and add an impact angle to the diligence process.
Thanks for the info. Surprised to hear that impact arms of PE shops are not better in terms of culture/hours than MF's traditional arms by virtue of being staffed with people who are comfortable with sacrificing comp to some degree for the sake of doing meaningful work.
This is not right - at a lot of the impact funds within MFs, the main fund will kick over deals that fit or can be engineered to fit the impact mandate. At standalone impact funds, most of the impact assessment is quickly cleared ahead of time before full diligence and/or is engineered post-diligence to work. At an incredibly prominent impact investor I remember once making the case to IC that an investment was not impactful and most people agreeing, and then after a partners meeting everyone "magically" emerged agreeing it was impact generating.
This is also not right... lots of these places have partners with traditional dealmaker backgrounds and so culture will be virtually indistinguishable from what you would get had you worked with them at their last (non-impact) fund (e.g., Apollo) and/or if it has professionals who came over from the main fund (e.g., BCDI). I could see if you worked at a B&M or places without typical banking / dealmaking backgrounds how this would be the case, but I wouldn't expect a walk in the park unless you do find someplace extremely non-traditional.
Thanks for the perspective, I think it's fair and representative that there is a good amount of variability in the space - often dependent on partner / family personalities. From personal experience at an impact-only fund, I've seen / worked on deals brought to IC that were agreed upon as commercial home-runs with deal team already having done most of the work, only for 1-2 partners to question the impact thesis and ultimately put it to a halt. These deals (mostly growth) almost always went on to sign on a tier 1 institutional fund as their lead. Totally agree that impact is not always well-defined or rigorously backed-up, hence it's not an 'absolute bar' of sorts that you can maybe consider returns to be, but ultimately from my experience it has still added a layer of complexity to dealmaking that I haven't found in traditional returns-only funds.
Obviously there are folks in the space who get into it for the wrong reasons, but I have in fact generally found that dealmakers who departed traditional funds (even sweaty ones) do tend to soften up in the impact world. I took the same company to IC at an impact-fund vs. traditional PE shop and the process was night and day. I'd say for those who grew up in banking/PE, there are certain work styles that are ingrained that won't ever be shed, e.g. late-night turns of IC materials until quality, expectation of rigor/hygiene in modeling, etc. In the impact world, however, I personally found seniors to be less nitpicky and more intellectually honest because there was at least a modicum of interest in doing deals that you really believed were quality / net positive vs. many funds where I've seen so many partners just try to ram something through IC.
Again, just my thoughts and realize that perspectives may vary.
Very familiar with this space. TPG Rise is going to look identical to working at a middle market / growth buyout shop. Working at Bain Cap Double Impact is going to look like lower / mid market private equity. The impact evaluation is varying degrees of marketing to genuine, but it does not affect the fact that the core investment process is a private equity process.
Working at B&M or another foundation that has PRI investment standards means you're able to look at a wider range of interesting opportunities because your a priori goal is not necessarily returns; it's impact. You'll see them fund a number of different strategies. However that's not to be confused with working on typical endowment opportunities; B&M for example has a classic endowment where you could be doing something like HF FoF or PE FoF which is not really impact. However having talked to some of those guys, if you like your core job, you feel great doing what you're doing because every incremental dollar you earn goes towards something of high impact.
Working for other impact investors (e.g., not TPG Rise with classic "corporate" LPs) where you have a B&M type as an LP means you are somewhat more constrained into what you fund having more impact. E.g., if you have just one LP that has PRI goals, your investments have to meet PRI goals (by nature of them being an LP in your fund). You will have a small sleeve of say 10-20% of your fund where you don't have to be able to convince your LP committee that they meet PRI goals (e.g., discretionary impact). But candidly my own observation is the impact in those deals is a total exercise in mental gymnastics where partners see a good return and then engineer a way to make it look like impact. Having seen it first hand, you either do the mental gymnastics, or you quickly become cynical.
Different impact firms have different impact measures. For example, of the megacap impact platforms, I actually think some have decent impact measurement whereas some are just pat-on-the-back factories for LPs who want to feel good about what they're investing in, and they're willing to allocate money to do that because that's a current market norm (increasingly) for allocators.
If I were you, I would decide whether you really want to go all in on the impact investing part, or if you just want to be a PE professional who can "buy-in" to impact generation (whether genuine or not) so that you feel good about yourself. Nothing wrong with either; both are expanding an asset class that I think will be increasingly important in the future even if it does not end up being the be-all-end-all most practitioners think it will be. If you want the former, it will behoove you to have good banking / PE training, but you should spend time really getting accustomed to the "real impact" and being in circles with E&F, NGOs, etc.
Thanks for info. I don't know a ton about the space but it seems like TPG does a good job of measuring impact relative to other funds like Bain Double Impact.
I would agree - I think IMM is a pretty interesting measurement and generally I'm a fan of standardized measurements as opposed to ad-hoc measurements and even no measurement funds.
Who is B&M?
Bill and Melinda gates foundation
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