WHARTON: GREAT EXPECTATIONS FOR FINANCIAL RETURNS, BUT QUESTIONS ABOUT MISSION PRESERVATION
By Dennis Price, ImpactAlpha
Impact is in the eye of the beholder, or at least in the eye of the fund manager.
A new study on the financial performance of private equity impact investments provides fresh data that suggests at least some segments are indeed delivering “market-rate” returns.
Moreover, the report, “Great Expectations: Mission Preservation and Financial Performance in Impact Investments,” from the University of Pennsylvania’s Wharton Social Impact Initiative, found that a focus on social mission may even enhance a company’s acquisition or “exit” value.
“The average impact investments are average, but there are winners,” said Chris Geczy, one of the authors. “Managers say there’s little tension between purpose and profits.”
In my experience that is a belief-based answer, not a data-driven answer. —Cathy Clark, Director of CASE i3 Initiative on Impact Investing at Duke University
That reassuring finding, however, begs the question of how to validate that social mission. The authors largely relied on self-reports from impact fund managers that the missions of their portfolio companies would be preserved after they were sold.
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