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Creation Investments Social Ventures Fund II, LP Announces An Oversubscribed Final Fund Closing of $75 Million

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FOR IMMEDIATE RELEASE

CHICAGO, IL – June 14, 2013 – Creation Investments Social Ventures Fund II, a global private equity fund focused on financial services and microfinance, completed its final closing on May 31, 2013 with total committed capital of $75 million USD.  The Fund was oversubscribed on its target of $60 million USD less than one year from launching, and hit its hard cap of $75 million USD with substantial investor support.

 

Creation Investments Capital Management, LLC, headquartered in Chicago, Illinois, is a leading impact investment fund manager with an overall investor base composed of over 100 US and European institutional and family office investors along with several high net worth individuals.  Over 90% of Fund I investors committed to Fund II, alongside a General Partner commitment of over $7.5 million.

 

To date, the Fund has deployed 35% of its committed capital, making equity investments in three Microfinance Institutions (MFIs) and Small-and-Medium Enterprise Lenders in Latin America and Asia.  Specifically, portfolio holdings include: Grupo Finclusion S.A.P.I. de C.V. SOFOM E.N.R. (Mexico), Sonata Finance Private Limited (India), and Grameen Financial Services Private Limited (India).

 

Each of the Fund’s portfolio companies is committed to providing financial services to under-banked individuals and businesses, helping to facilitate access to capital and economic development. Beyond small business lending, several of the Fund’s portfolio companies offer micro-insurance, micro-savings, money transfer, micro-pension products and other financial services. As of March 31, 2013, the total aggregate loan portfolio is $145 million USD with over 573,000 active borrowers.

 

Creation Investment Social Ventures Fund II seeks to make significant growth equity investments in earlier stage, high potential financial services providers in emerging markets, as well as buyout transactions in more mature MFIs transitioning out of NGO ownership. The Fund Manager seeks to add value and achieve greater scale through active management, in-market consolidation, and expansion of the financial product offering.  The Fund aims to allocate capital in three major geographic regions – Latin America, Asia, and Eastern Europe – resulting in a diverse, global portfolio in core emerging markets.

 

The Creation Investments team, led by Patrick Fisher and Ken Vander Weele, has proven its ability to originate unique impact investment transactions, recruit seasoned management for portfolio companies, access debt capital to fund growth, deliver technical assistance and technology to enhance systems, maintain a focus on responsible investment and client protection principles as a UN PRI signatory and Smart Campaign member, and add value through active involvement in all levels of the business.

 

“We are excited to have attracted a sophisticated set of private sector investors to the global financial inclusion space, providing them with the opportunity to maximize their financial and social returns through impact investments,” said Patrick Fisher, Managing Partner and Founder of Creation Investments.

 

Mayer Brown LLP served as legal advisor and KPMG LLP as tax advisor and auditor.  Silicon Valley Bank supports the Fund and the Fund Manager through its banking, credit and foreign exchange services. The General Partner is comprised of the Creation Investments team and affiliates of Promus Holdings, LLC, a Chicago based multi-family office and alternative assets manager in which Mr. Fisher is also a Partner.

 

About Creation Investments Capital Management, LLC:

Creation Investments is a leading alternative investment management company with a focus on private equity investments in Microfinance, Small-and-Medium Enterprise lenders, Emerging Market Banks, and other Financial Services Providers. Creation Investments sponsors and manages impact investment funds and one-off investments in social ventures, seeking to maximize financial and social returns on investment. For more information, go to: http://creationinvestments.com/

$9 Billion To Flow Into Impact Investments In 2013

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JANUARY 22, 2013 • 

According to research from J.P Morgan and The Global Impact Investing Network, $9 billion will be committed to impact investments this year. That would represent a 12.5% boost from the $8 billion that flowed into the space in 2012, the research shows.

Impact investments aim to produce a financial return while providing a positive impact through projects such as alleviating poverty, promoting human rights, engendering fair trade, or improving the environment.

The current research, culled from a survey last year of 99 active impact investors, found that most respondents said the financial and impact performance of their investments are in line with expectations. Nearly two-thirds of the sample said they shoot for market rate financial returns on their impact investments.

Half of those surveyed are fund managers who expect to make 10 impact investment transactions this year.

Most of the investments will be made in the food and agriculture sector, according to the survey, with sub-Saharan Africa receiving the largest share of total capital committed (34%). Latin American and U.S. companies will receive the next largest share (32%).

In developed market economies such as the U.S., healthcare companies will receive the most investment dollars.

Most investments (78%) are being made in growth-stage companies, with less than 20% in seed/startups and just over half in venture-stage organizations. Thirty-three percent of investments are headed for bigger and more established private companies, while nearly 10% of investments will be made in publicly traded stock.

Interestingly, 83% of the respondents said they make impact investments via private equity instruments. Conventional wisdom held that private impact investments made in the developing world were largely credit, or debt-driven because of risk and recourse measures.

After private equity, the next largest investment vehicles of choice among survey respondents were private debt (66%) and equity-like debt (44%).

Despite numbers showing a slow-building momentum in the impact investing space, respondents said the top challenges to growth were “lack of appropriate capital across the risk/return spectrum” and “shortage of high quality investment opportunities with track record.”

To help promulgate impact investing, those surveyed said governments can help grease the skids by providing technical assistance, tax credits, guarantees, better regulation, co-investment opportunities and procurements.

Metrics and standards are also important to fuel industry growth. Seventy percent of those surveyed believe standardized investment metrics are key to the development of the impact investing industry.

As more traditional investors consider impact investments (“many” investors, especially among high-net-worth people and family offices, are starting to consider the impact investment market, according to the survey), standards and risk measurements will become increasingly important.

The overall takeaway from the survey is that impact investing has moved past the “fad” stage and is maturing into a more fully realized segment of the financial services industry. With Goldman Sachs, Morgan Stanley, JP Morgan, Credit Suisse and others launching more robust impact investment programs, and with operators such as TriLinc Global advancing in the independent financial advisor market, mainstream funds and program offerings are sure to follow.

That means even more growth in the coming years.

Making a profit from making a difference – FT.com

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August 5, 2012 5:40 am

Making a profit from making a difference

By Sophia Grene

Sustainable logging carried out in Cameroon in the Congo Basin natural woodland©GettySustainable logging carried out in Cameroon in the Congo Basin natural woodland: preserving forests is just one project impact investing can help

To many, investment is purely about generating a return on their money, but a growing band of wealthy individuals and institutions are seeking to achieve a little more.

“There’s a growing hunger from the wealthy to go beyond how to spend it, understanding if they don’t engage with these [social and environmental] issues, social problems will arrive on their doorstep,” says Paul Szkiler, chief executive of Truestone Impact Investment.

Impact investing, most commonly defined as investments made with the intention of helping to solve a social or environmental problem as well as generating a financial return, has seen growing interest from investors, particularly since the financial crisis.

It covers a wide range of areas, from microfinance to private equity in developing markets and even “social bonds”, an innovative way for governments to fund services provided by non-state bodies on a payment-for-results basis.

The term impact investing was coined by the Rockefeller Foundation in 2007 and a year later the Global Impact Investors Network was launched. Since then, investment managers and intermediaries report a steady increase in interest in the sector, but it is hard to pin down a reliable figure, given the sector’s fragmented nature and the difficulty of defining it.

For one of the most developed and codified sectors of the impact investing world – microfinance – estimates as of 2010 vary from $7bn invested (from Swiss microfinance manager and adviser Symbiotics) to $24bn committed (from the Consultative Group to Assist the Poor), demonstrating the difficulty of getting a sense of the size of the sector.

The GIIN definition is frequently adopted: “Impact investments are investments made into companies, organisations, and funds with the intention to generate measurable social and environmental impact alongside a financial return”, but even that leaves a number of queries, such as whether that financial return is expected to match market returns or if it comes second in any conflict between it and the social impact.

In general, practitioners and investors are keen to make a distinction between “social impact first” investments, where the investor is prepared to sacrifice some financial return in exchange for the belief their money is doing good, and “social and financial” investments, where the investment product aims to produce returns comparable with the market.

“The second type appeals more to high net worth individuals,” says François Passant, executive director at Eurosif, the European social investment forum. “It’s got that entrepreneurial spin that resonates with them.” For people who got rich by building their own business, it feels more appropriate to help others by encouraging them to work for themselves than to give money, he explains.

Mr Szkiler remembers a presentation to JPMorgan about his business: “The global research guys were saying ‘hmm, that’s ambitious’, but the wealth management people said ‘that’s exactly what we’re looking for for our clients’.”

Truestone is about to start fundraising for its Global Impact Fund, which aims to return an annualised 8 to 10 per cent net over the medium-to-long term. With a six month lock-up period, the fund does require investors to be prepared to take a longer-term view, but Mr Szkiler is confident of reaching his target of £40m.

Institutional investors are not immune to the appeal of doing well by doing good, he adds. “We see institutional investors in that area, but so far really only the giants,” he says. Their motives may not be precisely the same as those of individuals: “There’s an element of looking for stable financial returns, even if modest, that are decorrelated with the rest of financial markets.

“There’s also a reputational benefit for the large institutional investor, and there is the concept of universal ownership,” he adds.

The theory of universal ownership states that beneficial owners in a fund not only have an interest in direct financial returns but also in making sure their investments work towards improving the world in which the investors live.

The categorisation of an investment vehicle as impact investment does not always come from the promoter. Nikko Asset Management has two World Bank Green Bond funds, invested in the triple-A issuer’s bonds – proceeds from which are used to fund climate change mitigation projects.

“We didn’t set it up as an impact bond, but it falls in that direction naturally,” says Stuart Kinnersley, Nikko’s European chief investment officer. “Investors are getting this positive externality in addition to the market returns you would expect.”

Nikko’s institutional vehicle has seen approaches from investors specifically interested because they have identified it as an impact opportunity. “Many people are questioning the current model of capitalism,” points out Mr Kinnersley. A version that makes explicit use of the structures of capitalism to improve the world seems attractive to many of those questioners.

Unsurprisingly, development financial institutions such as the German KfW bank or Triodos Bank are interested in impact investing, as are many charities that rely on income from an endowment and prefer to make investments related to their mission rather than arbitrary unrelated investments.

In the UK, there are plans afoot to raise the profile of impact investing and make it more accessible to retail investors. This is the aim of the Social Stock Exchange, likely to launch some time next year.

It is the brainchild of Pradeep Jethi, a former product developer at the London Stock Exchange, and is backed by the Rockefeller Foundation and the UK’s Big Society Capital.

“I want to use my capitalist skills to make the world a better place,” says Mr Jethi. “If we don’t do something, capitalism will eat itself.”

Copyright The Financial Times Limited 2012.

Impact Investing Creates Template for Responsible Capitalism

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Posted: 02/14/2012 10:13 am

 A microfinance lender in Tamil Nadu, a rice farm in Tanzania, a housing project in Chiapas and a rural development bank in Pakistan: all these projects are recipients of impact investment capital, committed to “doing good while doing well,” in one of the fastest growing investment trends of the past two decades.

Impact investing has developed out of traditional philanthropy in an effort to find solutions that allow investors to make profitable investments that can also address social and environmental challenges. Impact investors seek to combine the seemingly conflicting aims of investing for maximum risk-adjusted returns and contributing to social good. The level of return expectation varies according to the type of investor. Individuals or foundations tend to prioritize social impact over financial return and are willing to forgo the latter if the social goal is clearly advanced.

By contrast, institutional investors, especially those like pension funds which owe a fiduciary duty to their beneficiaries, usually look for a return that is at least competitive with traditional asset classes. As a result, investment risk appetite will also differ. Most impact investing takes place via private transactions with small businesses, often operating in emerging markets where poor governance and inadequate information flow may add greatly to the risk of the projects.

Investors in these companies will look for a commensurate financial return, as well as measurable social impact on the ground. While some prefer the terms venture philanthropy or social investment, impact investing represents a distinct style of responsible capitalism which has become particularly popular among foundations, endowments and high net worth individual investors.

Industry pioneers, such as the $3 billion Rockefeller Foundation in New York, see impact investing as a way to find solutions to poverty reduction and other social problems; but more importantly to access the private sector capital markets that ultimately hold the wealth required to scale up these solutions globally. While charitable donations by high net worth individuals were down 35 per cent in 2010, according to Bank of America Merrill Lynch and Indiana University, the impact investing sector is expecting steady growth.

In 2010, JP Morgan forecast potential impact investment capital of $400 billion to $1 trillion globally over the next ten years. Much recent activity in impact investing has been effectively direct investing, with the typical venture capital approach sometimes supplemented by grants and capacity building. The Omidyar Network, for example, launched in 2004 by eBay founder Pierre Omidyar, “has invested $450 million in equity and grants to promote microfinance, entrepreneurship, technology and government transparency, mostly in developing countries.”

Investment managers such as the Acumen Fund and the Capricorn Investment Group, which manages the Skoll Foundation’s multi-billion dollar portfolio, are active in emerging markets across Asia, Africa and Latin America.

Impact investing does present significant challenges to investors. It can be difficult to obtain basic investment information in emerging markets, and equally hard to monitor and track the performance of small companies and projects. This is compounded by the complexity of trying to quantify the non-financial “impact” of investments: it is not that simple to compare the social benefits of investing in, for example, vaccinations in Ghana versus cleaner burning cooking stoves in India.To help donors and investors tackle this issue, the Global Impact Investing Network (GIIN), a non-profit company supported by the Rockefeller Foundation, has worked with B Lab to develop industry infrastructure aimed at improving information flow and creating a more efficient marketplace.

GIIN’s Impact Reporting and Investment Standards provides a standardized language and framework for measuring the social and environmental performance of impact investments, including a list of nearly 400 metrics, such as customer poverty level and access to education. B Lab has created a similar tool for institutional investors, with support from ratings agency Moody’s and several financial companies.

Improved transparency, the creation of analytical tools for investors and the beginnings of a clear market structure are encouraging mainstream institutional investors, such as pension funds, to look at impact investing as a credible asset class. For example, TIAA-CREF, a huge US pension fund, has committed approximately $650 million to impact investing, mostly to low income housing; and American insurance company Prudential is another significant player, with about $400 million in impact investments.

As more funds are allocated to this sector, the impact investing industry is evolving rapidly to meet the demands of a wide variety of investors. Traditional debt and equity are being supplemented by more innovative structures, such as the Social Impact Bond issued in the UK, where return is linked to measures of social performance such as reduction in prisoner reoffending rates.

Alexandra Tracy is chairman of ASrIA, the Association for Responsible Investment in Asia

This article was originally featured in a special report on Sustainable Investments, produced by Raconteur Media and distributed in The Times (UK)