Shrinking returns and self-scrutiny drawing investors to impact – Bamboo Capital

Bamboo Capital's $500m SDG fund has continued to attract interest because its returns are now closer to wider market offerings, says MP Florian Kemmerich.

The falling returns seen across financial markets and a desire to support positive social impact in light of covid-19, has helped draw more investors to Bamboo Capital Partners’ SDG500 Fund, the firm’s managing partner told sister title Agri Investor.

“As the returns have been adjusting down, they come closer to the reality we are investing in,” said Florian Kemmerich. “The gap towards a market return, or at least what others promise, is coming closer to what we’re able to perform on the ground.”

The blended finance debt and equity vehicle, which is made up of six underlying funds, was launched in January with the support of several public and private institutions. SDG500, which has a $500 million target, has a marketed 12 percent internal rate of return for equity investments, while debt investments will seek to deliver returns of between 2 percent to 6 percent, depending on the tranche.

Kemmerich also highlighted the fund’s first loss layer and the pandemic’s effect on investor’s desire to do good, as other reasons for the continued strong interest.

“Large institutions embrace the idea of placing a safe investment because its heavy protected below but is still making a clear difference on the ground, which is measured and reported. So, despite the pandemic itself, we’re actually moving along with the endeavor. Also, I believe a lot of people have had time to think through the greater picture of the world,” he said.

Of the six underlying funds, Bamboo Capital’s ABC Fund is the most directly focused on agriculture, while the BUILD, Care SheTrades, BLOC SmartAfrica and BLOC Latin America funds all have the capacity to invest in the agri value chain. The group of funds is completed by the HEAL Fund, a venture capital fund investing in healthtech businesses in emerging and frontier markets.

Bamboo Capital partnered with impact advisory and management firm Palladium at the start of September, in a move which the pair hope will put them in a position to mobilize $1 billion in impact investment by 2023.

Palladium has invested in and taken a minority stake in Bamboo Capital, which in turn has become the asset management arm of Palladium.

The pair hope to reach the $1 billion figure by successfully reaching SDG500’s $500 million target, using Palladium’s global network to support fundraising into Bamboo’s legacy funds, and through the launch of new financial products, Kemmerich confirmed.