Fund managers plan to almost double the amount of capital raised for impact investing in 2016 compared with last year, according to The Global Impact Investing Network (GIIN)’s 2016 Annual Impact Investment Survey.
Fund managers raised almost $6.7 billion in capital for impact investing last year and are eyeing $12.4 billion this year. The split between funds targeting emerging markets and those in developed markets this year was roughly in the middle, with $5.7 billion targeted for emerging markets and $5.6 billion for developed markets.
Impact investors still face challenges in fundraising, however, with the biggest concern being their ability to demonstrate a track record. The second largest problem was that investors were seeking to write cheques much larger than typical sizes for impact funds.
The LP base is widely varied, ranging from family offices and high net-worth individuals (HNWI) to foundations and financial institutions. The biggest number of fund managers, at 62, raised capital from family offices and HNWIs. Fifty-seven managers received commitments from foundations, and 39 collected capital from banks and diversified financial institutions.
“There is a diverse range of investors [LPs] across types and geographies,” GIIN research director Abhilash Mudaliar told Private Equity International. “Investors are generally quite positive and continue to be overwhelmingly pleased with their investments.”
In fact, 90 percent of survey respondents, which encompassed 158 fund managers, foundations, banks, development finance institutions, family offices, pension funds and insurance companies, said the financial performance of their impact investments was in line with or above their expectations. Of them, 19 percent indicated outperformance.
Those investors are planning to increase capital committed to impact funds by 16 percent to $17.7 billion this year, up from last year’s $15.2 billion. Their capital commitments flowed into 7,551 deals last year, and that will increase by 55 percent to 11,722 deals in 2016, GIIN said.
In terms of sectors, food and agriculture was the most popular one, with 88 survey respondents having allocated capital to it. Healthcare was second, with 78 respondents, and housing third, with 71 respondents.
“Food and agriculture is a critical, basic service,” Mudaliar said. “Investors in the impact investing space generally see it as a powerful tool for economic development.”
JPMorgan is the anchor sponsor for the survey, and the UK Government’s Department for International Development’s Impact Programme supported the research.