The billion-dollar impact funds keep coming.
Of the 165 managers on ImpactAssets’s latest ‘IA50’ list, at least two dozen have $1 billion or more in assets under management. That’s up by one-third from two years ago. Another 11 managed assets of between $500 million and a billion.
It wasn’t that all long ago that $100 million impact funds were something to celebrate.
The growing number of institutional-scale impact funds “signals the maturation of the space and the continued adoption of impact investing,” said Margret Trilli of ImpactAssets, which has curated the annual list for 14 years. ImpactAssets’ own portfolio has grown to more than $3 billion across 1,200 investments.
Other trends: an uptick in funds focused on climate and infrastructure, health and wellness, particularly mental health, and nature-based solutions, she said.
The IA50 contains a core list of 50 impact funds. Two additional rosters showcase emerging impact managers (65 managers) and “emeritus” funds (50).
This years’ funds on the combined list represent $130.6 billion in AUM, or an average $791 million, compared to 155 impact funds representing $97 billion in assets last year. The list was whittled down by the IA50 review committee from some 340 submissions.
The fund managers represent a cross section of impact funds across asset classes and sectors. Just over half, or 54%, favor private equity, and 33% private debt, including community development financial institutions, which made up around 14% of the total funds. Some 46% of the managers target market-rate returns, while 28% pursue above-market returns.
Impact newbies
Some 36 new fund managers made the list this year. Among the 11 on the core IA50 list are Oweesta, a 25-year old Native CDFI intermediary; healthcare-focused Vistria Group (see, “Patient outcomes, value-creation and headline risk in health care private equity”), and sustainable infrastructure financier Spring Lane Capital.
IA’s emerging impact manager lists showcases new strategies that have not yet hit the mainstream. Mad Capital helps farmers transition to regenerative agriculture; Second Horizon Capital partners with municipalities and communities to revitalize languishing real estate assets; Azolla Ventures, a Prime Coalition-affiliated venture firm that invests in early-stage climate solutions where it can provide additionality. Women-led Beyond Capital Ventures invests in early to growth stage companies addressing the rising consumer classes in Africa and India.
Scaling impact
As impact funds grow in size, GP stakes strategies are helping them reach the next level, noted Jed Emerson, a senior fellow with ImpactAssets. “The ability for a Capricorn or other folks to actually take these groups up to the next level through GP staking strategies” shows that impact can scale with integrity, he said (see, “Capricorn stakes out the next wave of large-scale impact fund managers”).
About a quarter of both the core IA 50 managers and emeritus managers have impact reports verified by third-party assessors. While ESG investment has been under attack, impact investing “hasn’t missed a beat,” says Trilli. “It’s where the real impact happens.”
