Impact returns are ‘off to a good start’ but still have a point to prove

Impact investment may have come a long way – research last year by GIIN quantified it as a $1.2 trillion market – but there is still a sense it has yet to fully prove itself as a viable way of generating financial returns.

“I think it is still a little bit on the early side in terms of the volume of track record, but I think so far so good,” said Jonathan Hirschtritt, a managing director at GCM Grosvenor, which invests client money across various alternatives strategies. Hirschtritt was speaking on a panel of limited partners at the Impact Investor Summit: North America on Tuesday.

He was responding to an audience question that tapped into a running theme of the first day of the conference: whether there was now sufficient track record of financial returns in the private markets impact space to give investors comfort about increasing allocations to it.

Earlier in the morning, Todd Cook, managing partner of Bain Capital‘s impact platform, was asked whether managers in the private equity impact space had yet proved their ability to deliver competitive financial returns alongside impact. “I can’t really get into specifics per se on returns, but I can say – at least in the number of exits we have had in the first fund – we are off to a very good start,” he said. “We have continued to see exits that have been meeting or exceeding our [target] returns.”

John Ancona, head of private equity due diligence at JPMorgan Private Bank (an investor in Bain Capital’s impact funds) also sounded a positive note on the early results: “As we start to see exit activity across the market – using you [Bain Capital] as a case study – it’s exciting in two ways. One is proving out the story that you can generate returns full financial returns here – we are seeing you generate returns at or above what we expect of a regular private equity fund that doesn’t have the double bottom line – and two is the ability to prove there is an impact story and you can actually measure it.”

Mark Hays, a managing director at wealth manager Glenmede, highlighted the difficulty of benchmarking performance in a category as broad and loosely defined as “impact”: “I’d love to see more track records around climate or healthcare investing; impact as a broad space tries to combine too many different types of investing into one, and it kind of muddles the picture.”