Impact investing: The best sources of fund capital

Impact investing fund managers had collected $5.4bn from banks and diversified institutions as of 31 December, a 24% annual increase from 2014.

Banks and retail investors are the most zealous converts to impact investing funds, according to research from the Global Impact Investing Network.

Impact investing fund managers had collected $5.4 billion from banks and diversified institutions as of 31 December, a 24 percent annual increase from the same point in 2014 and the highest compound annual growth rate of any limited partner subset, according to the industry body’s Annual Impact Investor Survey.

Capital raised from retail investors grew at a 21 percent CAGR over the same period.

Pension funds remain the largest supporters of impact investing funds, accounting for 17 percent of the $79 billion of GIIN members’ total fund AUM. Retail investors and banks provided 16 percent and 14 percent respectively, followed by family offices or high-net-worth individuals at 11 percent.

Funds of funds were the only investor subset to decrease their impact AUM over the four-year period, to $579 million from $654 million.

LPs seeking impact investment opportunities have a raft of options. Blackstone is the latest to enter the fray, having announced plans in May to raise an impact fund through its Strategic Partners unit, following in the footsteps of KKR, TPG and Bain Capital.

Client demand was cited by 85 percent of fund managers as “somewhat” or “very important” motivation for pursuing impact investments. The top driver was LPs seeking to align their values with fund managers, followed by achieving financial returns and addressing a particular impact goal.

Managers raising funds find impact-focused investors to be less concerned about exiting assets than those that are impact-agnostic, the survey found.

GIIN surveyed 266 respondents in total, representing $239 billion of AUM.