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."
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Bump on interview prep for an impact fund
Do you know of any more impact funds besides the ones mentioned?
Northsky, Stafford
L Catterton Impact Fund is an interesting one as well!
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following
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What do you want to know? I worked at an impact fund briefly and write a blog about impact investing.
Everyone has a blog and it doesn’t signify expertise, so I only mean that to say that I’m a former practitioner and still give the field a lot of thought (you can judge any answers I have on their own merit).
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.
PM for blog link too!
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I work at a MF (~$50Bn AUM) that has a small impact platform. For reference, I am a VP and did not come in after IB analyst stint.
Recruiting: one person from my group at top BB went to Bain Double Impact (s/he was super strong and could have gone anywhere). So it seems if that's what you want, it's attainable, you just need to focus on that as you would any other aspect of recruiting (e.g., sector, geography).
Exit: Other impact funds? development bank? VC? any corporate role you want. Might be able to get MM PE; depends how you spin it and what shop you were at (big difference between coming from TPG Rise Fund vs. some no name impact fund managing $50M).
Business School perception: Solid. Good story to be told there. Again depends on what fund you're coming from, what you want to do post B school, and how well you write the narrative. Look up some profiles on Poets & Quants of people who used to work at impact funds, where they got in, and what they plan to do after.
Difference with LBO and growth equity: pace will probably be slower and the comp less robust. This might not be a bad trade off, depending on your perspective. I don't actually think the nature of the work is that different, though you will have a lot more ESG metrics to consider in your diligence and portfolio management. LP reporting will also include a large impact component as well as all the regular stuff.
Can anyone speak to the comp at these funds relative to their peers (eg. TPG Rise vs traditional)
Rise has same comp as growth; BCDI has same comp as LBO fund
Can anyone drop some names of funds that focus on inclusive fintech?
Everything is entirely firm-dependent. Most of the deals I've seen KKR or TPG do have been very growthy but very much of the style of deals that the flagships do. Depending on the size of the deal, these firms will also share their deals between the impact fund and one of the flagship funds. I wouldn't honestly think of it as really different at all from growth equity, just with potentially some additional diligence steps. At these larger GPs, if you're on the investment team you'll probably be more focused on the business diligence and there will likely be somebody else who has the expertise on the impact side that will do that underwriting (or at least act as an in-house subject matter expert for the investment team to consult during diligence).
It obviously changes significantly if you're at a smaller, boutique place that's 100% focused on impact investing. If you read the ImpactAssets 50 list or spent some time on Impact Alpha, you'll see there's a huge universe of GPs doing this but many of them are tiny (<$50m), first-time funds, or are led by people with limited investment track records. There are some GPs out there that are really doing impact but are also excellent investment professionals but you have to work hard to figure out who they are. Your experience at a small boutique could vary wildly as it will be a little bit more like working at a start-up while also being an investor. Your comp will obviously be much lower here than at KKR Impact, TPG Rise, etc. That said, what you'll do might actually be generating more impact. For many of these large GPs, raising an impact fund is just another AUM grab and an opportunity for them to have another management fee stream. Look at some of the deals they've done and ask yourself what the impact really is that happened only because the investment was made (which is one of the key questions that any impact investor should ask because if the impact would've happened anyway). I think there's a choice to be made as you look at the landscape about whether you want to (1) get paid nicely and potentially make a real difference in the world or (2) get paid PE money and maybe make an impact but also do a bunch of greenwashing that probably helps you sleep well at night.
Regardless of firm, MBA programs will eat this up. Seriously, I think you could work at a bottom-quartile, no-name, only raised a single fund and then flamed out GP and business schools would love it if it had an impact strategy.
Impact funds sound like a marketing story to just amass more capital in the spirit of ESG (love it or hate it). Reality is all the investments they will make could've easily fit into another pocket of capital already run by PE managers.
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