ImpactAlpha LP/GP: Creative exits for chaotic times

Greetings, Agents of Impact! 

Welcome to this week’s ImpactAlpha LP/GP, where we take you inside the real business of impact investing and the dynamic relationships between owners, managers and intermediaries of impact capital.

In this week’s newsletter:

• Creative exits for chaotic times 
• $1 billion target for water equity
• Temasek’s ABC Impact closes $600 million
• Impact as a source of alpha

Featured: Impact Exits

Restive LPs look to secondaries and other creative exits to recoup their capital. The LPs want their money back. This was supposed to be the year when initial public offerings and mergers and acquisitions came roaring back. Instead, tariff threats and global volatility have slammed shut an incipient thawing of the IPO market and caused would-be acquirers to hit pause. That has prolonged an exit drought that has left private equity funds and their limited partners without needed liquidity. Making matters worse, stock market declines have deflated valuations of the public equities holdings of pension funds, endowments and other institutional investors, leaving them over-allocated to private equity – exacerbating the “denominator effect.” The mismatch is driving the red-hot secondaries market, as LPs look for ways to exit increasingly long-in-the-tooth investments. These investors are now scrutinizing fund managers’ ratio of “distributed to paid-in capital,” when evaluating new allocations, making it harder for fund managers to raise. “DPI is the new IRR,” Jean Francois Roberge of Mubadala, the $300 billion Abu Dhabi sovereign wealth fund, declared at a recent conference. Roberge was referring to a measure of the capital returned to investors in a private equity fund, and a fund’s internal rate of return. 

• Alt exits. The new urgency around alternative pathways to exits include established vehicles such as secondary funds that buy up LP stakes, and continuation vehicles set up by general partners to hang onto trophy assets. The secondaries market reached a record $152 billion last year, up from $109 billion in 2023. Investors are creating new strategies. Octobre’s Liquidity Guarantee Facility, launching this year with support from the European Commission, offers a commitment to buy out the stakes of impatient impact investors at any time. Others are rethinking their primary investment structure to avoid the need for IPOs and acquisitions altogether. Tokunboh Ishmael of Alitheia Capital, a Nigerian fund manager that invests in gender inclusion, is looking at “self-liquidating” structures, such as revenue-based financing, and redeemable instruments that sell equity back to founders (see The Liist below). Topics related to liquidity and secondaries are all over the agenda of June’s SuperReturn event in Berlin. 

• Impact secondaries. Research firm Preqin has identified 257 secondary funds in the market seeking a total $94 billion. The competition has reduced spreads, or the difference between an investment’s book value and its sales price. “If you think you’re getting a bargain, you probably don’t understand the underlying portfolio in some fashion,” says Timothy Cunningham of Touchstone Group, a private equity placement agent. It’s a different story for the sleepier impact secondaries market. Minneapolis-based North Sky Capital, one of the few managers offering an impact secondaries fund, raised $250 million for its ninth fund last summer. “Our strategy, broadly speaking, is to bring the full secondary toolkit to the impact marketplace and provide those liquidity solutions to both LPs and GPs,” the firm’s Tom Jorgensen tells ImpactAlpha. North Sky looks for positions in decarbonization solutions, sustainable agriculture and health and wellness. Blue Earth Capital, established by founders of the private equity giant Partners Group, launched its secondaries fund in 2023. 

• Structural shifts. Even if the market turmoil subsides, secondaries and other liquidity options are likely to continue to play an important role. Many companies now stay private longer than the four to seven-year hold times of most fund managers amid a broader merging public and private markets. “There’s a lot of runway ahead for secondaries, and particularly impact secondaries,” says Jorgenson. Less than 1% of impact capital raised is for secondary strategies, he says. “We think that that number should be probably closer to 3% or 4% to be more consistent with the general private equity market.”  

• Keep reading, “Restive LPs look to secondaries and other creative exits to recoup their capital,” by Amy Cortese on ImpactAlpha.

Dealflow: The Liist

Bringing $1 billion to clean water and sanitation access in the Global South. WaterEquity has for nearly a decade moved capital to the stubbornly underfunded water sector. Through five funds, the organization founded by actor Matt Damon and Gary White has directed more than $460 million to financial institutions that on-lend to families and businesses adopting clean water and sanitation systems and technologies. It’s out with its first evergreen fund, the WaterEquity Everspring Fund, to “serve as a perpetual source of funding for our borrowers.” WaterEquity is looking to mobilize and deploy $1 billion through the Everspring Fund. WaterEquity is a new addition to ImpactAlpha’s Liist database, which spotlights impact fund managers and their investment strategies. The organization is also deploying capital from its Water and Climate Resilience Fund, which makes both debt and equity investments in providers, rather than financiers, of water, sanitation and hygiene systems. The fund finances water supply and distribution and wastewater treatment and reuse. Also new to the Liist:

• Catalyzing innovation. The newly renamed Miller Center for Global Impact at Santa Clara University has been incubating and accelerating social enterprises in emerging markets for more than 20 years. Three years ago it launched Miller Center Capital to provide early and growth-stage debt financing on concessional and flexible terms to its alumni. The center says the $1.1 million it has invested has catalyzed more than 10 times that amount in additional investments. The center is partnering with Beneficial Returns to manage its Innovation Fund and is looking to raise $5 million through a mix of recoverable and nonrecoverable grants.
  
• Climate capital for LatAm. Switzerland-based AlphaMundi Group is in the market with a planned $50 million fund to support climate adaptation and resilience in Latin America through a mix of equity and mezzanine financing. The fund manager is looking to back 12 to 15 companies addressing climate impacts on communities while supporting social and economic inclusion of women, youth and other underserved populations. Its capital will be paired with technical assistance from the AlphaMundi Foundation; the fund’s fees are linked to both financial returns and impact outcomes. The Alpha Latin America 2030 Fund is domiciled in Ontario and has a team based in Bogotá.
  
• Climate + gender. When Alitheia Capital launched in 2009, it was perhaps the first private equity fund manager in Africa with an explicit strategy for gender inclusion (see, Agent of Impact: Tokunboh Ishmael). The Lagos-based firm is in the market with its second fund and an expanded strategy that addresses the impact of climate change on African businesses and women. Alitheia Amplify Fund is looking to raise $200 million, primarily from development finance institutions and institutional investors.
  
• Read on, and check out dozens more fund managers in ImpactAlpha’s improved Liist database. Suggest your own Liist entries here. 

Temasek Trust’s ABC Impact closes a $600 million fund for impact investments in Asia. The second fund from ABC Impact, a private equity firm managed by Temasek Trust Asset Management, will invest growth capital in mid-sized companies with measurable impact in clean energy and climate resilience, inclusive finance and digital access, healthcare and education, and sustainable food systems. The Singapore-based fund attracted institutional capital from Temasek, Temasek Trust, Mapletree Investments and SeaTown Holdings, as well as an unnamed Southeast Asian sovereign wealth fund, a US-based family office and individual investors. The Asian Development Bank invested $20 million. Early investments from the fund include affordable dialysis provider DCDC Kidney Care in India, and renewable energy developer Tekoma Energy in Japan.

• Demand driven. ABC Impact’s predecessor fund raised $300 million in 2019. Investments included rural small business lender Chongho Bridge, affordable dental care provider Kim Dental In Vietnam, and Singapore-based Sunseap, a clean energy provider that ABC Impact exited in 2021. “While policy can accelerate change, it is market demand, capital flows and competitive forces that ultimately drive adoption and scale,” said ABC Impact’s David Heng. Businesses in the fund’s portfolio aren’t waiting for external signals, he said. They are “addressing critical needs in ways that are both impactful and financially sound.”

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Dealflow overflow. Investment news crossing our desks:

• Catalyze welcomes seven first-time fund managers serving underrepresented entrepreneurs and communities to its 2025 cohort. The group includes Adaptation Ventures, which invests in disability tech; Dark Pool Capital, a VC secondaries fund manager; and Luminescent, an early stage healthcare fund manager. (Catalyze)

• California-based Mainspring Energy raised $258 million to manufacture generators for renewable energy suppliers and data center owners and operators. The generators use a process that converts gas fuels, including natural gas, propane and biogas, to electricity. (Bloomberg)
  
• Apollo is teaming up with community solar developer Summit Ridge Energy on a $400 million joint venture to own and operate community solar projects in Illinois. (ESG Today)

Signals: Impact Alpha

The higher a portfolio’s ‘impact materiality,’ the higher the financial returns. Higher “impact materiality” – the extent to which a company’s revenue is derived from impactful products or services – means higher financial returns, according to a new study of publicly listed equities from Schroders, the trillion-dollar investment manager, and Oxford’s Saïd Business School. “These findings suggest that impact investing can deliver strong risk-adjusted financial returns, with impact itself acting as a driver of alpha in the right conditions,” write Schroders’ Catherine Macaulay and Oxford’s Amir Amel-Zadeh. “Impact portfolios don’t just keep up with traditional benchmarks – they can even outperform them.” The researchers identified 257 firms using a framework developed by BlueOrchard, the impact investing manager Schroders acquired in 2019, and randomly generated 10 portfolios of 40 companies each. Eight of the 10 outperformed an MSCI benchmark between 2010 and 2023. “The impact portfolios demonstrated stronger absolute and risk-adjusted performance, lower market sensitivity, and greater resilience in downturns,” the study concludes. “Even after controlling for market risk, size and value factors, impact firms generate statistically significant alpha.”

• Performance drivers. Impact firms operate with stronger margins, expand their workforce faster, and actively deploy capital, the authors say. “On average, the monthly alpha is about 1% and is highly statistically significant.” Climate and other impact-focused investment managers have increasingly adopted impact materiality as a way to select equities, setting thresholds of 50% to 80% of revenues. The study cites France-based Schneider Electric, which has steadily built its business around helping companies optimize energy efficiency and reduce emissions. “With increasing demand for sustainable solutions, Schneider is well-positioned for future growth,” the authors say. Mexico City-based Gentera provides credit and financial services to underserved populations, particularly women. The authors say the company’s double-digit loan growth and return on equity of more than 20% “demonstrate that financial inclusion can be both impactful and profitable.”
  
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Agents of Impact: Follow the Talent

And the winner is… ImpactAlpha’s “Equity & ownership: Napoleon Wallace and the Reconstruction of Black wealth,” took home a “Best Documentary” award at the Boston International Film Festival last night. Special thanks to director Yuri Vaysgant, editor Tyler Schwartz, producer David Bank and the whole team – and, of course, Napoleon Wallace.

Asset Funders Network adds JPMorganChase’s Mercedeh Mortazavi to its board of directors… Social Finance welcomes Elena Curtin, previously with Bridgespan Group, as an impact advisory associate… George McCarthy will step down as CEO of the Lincoln Institute of Land Policy at the end of this year… Camila Thorndike, previously with Rewiring America, joins The Lemelson Foundation as a climate action program officer… Joseph Rowntree Foundation is looking for an investment associate director in the UK.

Homium becomes a member of the National Association of Local Housing Finance Agencies, an affordable housing finance nonprofit policy organization (see, “Homium aims to help home buyers overcome the down-payment hurdle”)… Village Capital is accepting applications for its 2025 Empowering Sustainable Entrepreneurship program, which will support 30 startups addressing climate adaptation, renewable energy and food security in five African countries.

👉 View (or post) impact investing jobs on ImpactAlpha’s Career Hub.

Thank you for your impact!

– April 15, 2025