MGG Investment Group, a mid-market private credit fund manager based in New York, is considering the launch of a dedicated impact fund, says managing director Daniel Leger. Speaking at PEI‘s Responsible Investment Forum: APAC Investor Day Thursday morning, Leger said that investors in the firm’s flagship funds had begun to show interest in the loans the firm was making – particularly amid the coronavirus pandemic – to minority-owned businesses.
The firm has always made loans to businesses in sectors with a higher proportion of minority-owned companies, said Leger, giving the example of operators of airport concessions. Amid covid, “we found a lot of institutional interest in finding ways to funnel more capital to those types of business.”
“It became apparent to us that not only could we make a good rate of return, but we could also assist these owners in getting capital in a timely fashion,” Leger continued. While this type of investment has always been a focus for the firm, in the “last 12 months or so” the firm has been in “conversations with very large US-based insurance companies and pension funds that are really looking to allocate capital to the ‘S’ of the ESG mandate”.
MGG has deployed around $5 billion of capital since its inception in 2014, and around $800 million of this was invested in businesses Leger describes as “impact”. Of this capital, around half went to environmental business – such as solar power firms – and half went to “what we’d call social: minority-owned businesses or businesses pursuing those ends”.
“Investors could see the loans and asked if we could segment those and create a different fund,” Leger said. “We continue those conversations with the LPs and we may well launch a dedicated ESG-impact fund…with the emphasis on the social.”