Impact funds are part of a new wave of investing, catering to the political and ethical philosophies of certain types of investors. Recently, private equity data provider Pitchbook came out with a take on the state of impact funds investing. Here’s a look.
Growth in Assets Under Management
The first look is the growth in assets under management (AUM) for the impact fund investing arena. Growth has been explosive across the globe, going from around $10 billion in AUM in 2006 to $275 billion at the end of 2020.
Perhaps most interesting is the amount of dry powder (green bars) still available in the industry (dry powder is money that investment managers are waiting to invest, but as of the reporting date, had yet to invest the funds). Dry powder has gone from less than $1 billion in 2006 to around $75 billion in 2020.
Switching to the remaining value (blue bars), the remaining value of the impact fund AUM dollars have grown from around $2 billion in 2006 to over $200 billion in 2020.
Pitchbook has not released their 2021 estimates yet, although it would be a safe bet to assume that the AUM for impact fund investing continued to balloon this past year.
Number of Impact Funds Closed
The next view is of the number of impact funds closed between 2006 and March 2021 by strategy. Before looking, which of these categories would you guess would show up at the top spot? The categories are private equity (PE), venture capital (VC), real estate, real assets, debt, fund of funds, and secondaries.
For the close watcher of the industry, VC’s lead – at 41.6% – is unsurprising. Behind VC’s lead is PE at 28.6%, followed by real assets at 14.6%, and real estate at 5.5%.
Capital Raised by Impact Funds
The next view is of capital raised by impact funds between 2006 and March 2021 by strategy. When slicing the data this way, the view is more evenly split. On top of the capital raised is PE at $95.1 billion, followed by real assets at $69.5 billion, VC at $36.0 billion, and real estate at $24.6 billion. The remaining three sectors – debt, fund of funds, and secondaries – accounted for $18.6 billion in capital raised over the 15 years covered by the study.
Summing Up
Overall, although small, impact funds are growing by region and by reason. With the seemingly increased interest in mixing investing with political views, one can likely expect the growth to continue for the foreseeable future.
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