Cohen: Abraaj an ‘unfortunate blip’ on the impact road

The Apax and Bridges founder told delegates at PEI's Global Impact Investing Network Investor Forum that Abraaj's collapse bears little relation to its social impact.

Abraaj Group‘s collapse is an “unfortunate blip” on the impact investing movement, according to a pioneer of the strategy.

“It’s obviously not good for the industry, but it ain’t going to stop this movement,” Sir Ronald Cohen, founding partner of Apax Partners and impact firm Bridges Fund Management, told delegates at Private Equity International‘s Global Impact Investing Network Investor Forum in Paris on Tuesday. Cohen has been a long-time supporter of using private equity investing to drive social and environmental change.

Sir Ronald Cohen

“Abraaj didn’t collapse because it didn’t deliver impact and financial returns at the same time. Abraaj collapsed because of the governance issue,” he said.

“When you look at that trajectory, Abraaj is an unfortunate blip. If you are a responsible investment manager you don’t take money that you’re supposed to dedicate to a fund and use it for other purposes. It’s the ABC of being in a business where trust is the cement that keeps investors, and those who manage money for them, in a relationship.”

Deloitte and PwC were appointed in June to restructure Abraaj Holdings and the fund management business and sell their assets after reports emerged in February that limited partners in Abraaj’s $1 billion healthcare impact fund had hired an auditor to trace money.

Impact investing is gaining momentum. Investment manager and advisory firm Hamilton Lane is among the latest to have launched a fund dedicated to the strategy. It joins the likes of private equity heavyweights Bain Capital, Partners Group and KKR.

“Everybody has assumed forever that if you go after impact you’re not going to get attractive risk-adjusted returns; it’s like philanthropy, it’s going to cost you,” Cohen said. “[But] we’re exploding these myths.”

The UN’s Principles for Responsible Investment had more than 1,900 signatories as of April, representing more than $80 billion in assets under management, according to its website. Cohen said the uptake of impact across asset classes had been driven in part by consumers moving away from companies and products with conflicting ethics, as well as pension fund beneficiaries urging their managers to do good.

Pension fund contributors are telling their pension fund managers and asset owners are telling the firms managing their money that they want their portfolios to do good, Cohen said.

“Our money has to help achieve the purpose of creating a better world where we share prosperity more widely and we bring social progress to those whom the generous hand of prosperity has left behind.”

– Toby Mitchenall contributed to this report.