Social Impact Investing

Impact Investments:
An emerging asset class
Global Research
29 November 2010
technical assistance facility, which may subsidize fund costs and allow fund
managers to charge market-rate fees to investors. Maintaining fee levels in line with
traditional investments will help remove one potential barrier to attracting impact
investment capital in the short term. However, in the long term, some impact
investment fund managers may be able to justify higher fees by providing valueadded
services (such as rigorous impact investment measurement)for which investors
could be willing to pay.
Figure 17: Management fees
Histogram of survey answers.
Total # of investments = 374; Total size of investments = $582m
Figure 18: Carry fees
Histogram of survey answers.
Total # of investments = 233; Total size of investments = $254m
500
400
Number of deals
Notional, USD mm
200
150
Number of deals
Notional, USD mm
300
100
200
50
100
-
-
0-4.9% 5-9.9% 10-
15-
20-
25-
30% +
0-0.9% 1-1.9% 2-2.9% 3-3.9% 4-4.9% 5-6.9%
14.9%
19.9%
24.9%
29.9%
Source: GIIN, J.P. Morgan.
Source: GIIN, J.P. Morgan. Carry defined as % of fund's return retained by general partners.
Impact measurement systems are currently overwhelmingly proprietary
Our survey also asked respondents to reveal what type of social impact measurement
system they were using (if any). The choices were: a proprietary system, the system
employed by the investee company or fund (the recipient of the investment funds), or
a third party system. As Figure 19 illustrates, an overwhelming 85% of respondents
are currently using a proprietary impact measurement system, and 13% use the
investee’s system. Only 2% of impact investors currently employ a third-party
system and very few reported using an investee’s system. We anticipate this profile
to change as systems for measuring impact, such as IRIS, achieve broad adoption
across impact investors 38 .
38 For more on the IRIS metrics, see appendix.
36