The Ford Foundation, the US’s second largest endowment, plans to commit almost a tenth of its total assets to investments that reduce poverty and injustice in a strategy that may include private markets funds.
The New York-based endowment plans to commit up to $1 billion over the next decade to so-called mission-related investments (MRIs), according to a statement from the organisation. Capital will be allocated to impact funds and not to individual companies, and the foundation will carve out capital from its existing portfolio and deploy it into funds that have attractive financial and social returns.
“We are making this commitment because we believe MRIs have the potential to become the next great innovation for advancing social good,” Darren Walker, the endowment’s president, said in the statement. “We can’t neglect the tremendous power of markets, including the capital markets, to contribute — and with today’s announcement, we are putting a significant amount of our money where our mission is.”
The foundation will initially focus on affordable housing in the US and access to financial services in emerging markets. It allocates almost a third of its $12 billion total assets under management to alternatives including around $2.5 billion to private equity, according to PEI data.
It was unclear at press time how much of the foundation’s $1 billion may be allocated to private markets funds.
In an essay published on Wednesday on the foundation’s website, Walker wrote that all types of financial institutions, including private wealth advisors and large asset owners, are deploying investment products to meet the rapid rise in demands for sustainable investments.
“We believe we can achieve attractive financial returns while also contributing to meaningful social progress by following a steady, deliberative approach, building in strong oversight and risk management by our board of trustees, and working fully with partners in the private, public, and nonprofit sectors,” Walker wrote.
Xavier de Souza Briggs, a vice-president in the foundation’s economic opportunity and markets programme, will lead a team of investment professionals who will manage the MRIs, according to the statement.
Impact investing is gaining traction, with fund managers raising almost $7 billion in capital for the strategy in 2015, according to a survey by the Global Impact Investing Network (GIIN). Managers were expecting to raise more than $12 billion last year.
Family offices and high-net-worth-individuals were the most active investors in the strategy by number, followed by foundations, according to GIIN’s survey.
The Ford Foundation was founded in 1936 and has made more than $45 billion in grants. It has committed to private equity vehicles including those managed by Golden Gate Capital, Bain Capital and HIG Capital, according to PEI data.