The country’s first NZ-centric ‘impact’ investment fund has falling just shy of target in the opening round of capital-raising which closed off last week with $8 million committed from 35 investors.
However, the Impact Enterprise Fund (IEF) – a collaborative venture between the Ākina Foundation, New Ground Capital and Impact Ventures – could still hit the original $10-15 million goal in the final round of investor marketing expected to end some time late in April.
Roy Thompson, New Ground Capital managing director, said the group had targeted at least $10 million by the February 8 deadline “but we’re happy to be where we are”.
“Some of the bigger private equity funds in NZ launched at similar levels in their first rounds,” Thompson said. “It’s challenging raising private equity money in NZ but we hope to get to the $10-15 million in the next round.”
He said the 35 foundation investors cover a wide range of groups including philanthropic trusts, private equity investors, high net worth individuals, and even “some from Australia”.
In a release last week, the IEF name-checked St John’s College Trust Board and The Tindall Foundation as “cornerstone investors”. The $430 million plus St John’s College Trust (advised by Trust Investments Limited) funds Anglican Church-linked education in NZ and Polynesia.
Thompson said while the IEF would continue dialogue with potential investors until the final close in April, the fund was already in the process of placing the first tranche.
“We’re doing due diligence on a number of investments – including three environmental projects,” he said. “There’s a good pipeline but we probably won’t have invested before the final close.”
Impact investing – which targets specific non-financial factors in addition to monetary returns – has been on an upward trend offshore. According to the recent Global Impact Investing Network (GINN) 2017 industry report, the 200 plus entities it surveys collectively manage about US$114 billion in impact investment projects.
The IEF statement says impact investments are often at the “cutting edge of disruptive social and environmental innovations and can be expected to outperform their traditional predecessors”.
“[IEF}Investments will focus on expansion opportunities in fast growing sectors such as sustainable food production, agriculture technology, healthcare, clean energy, and education,” the release says.
Thompson said impact investing covered a broad spectrum from concessionary – where investors may give up financial returns in exchange for achieving other goals – to non-concessionary.
“We’re a non-concessionary fund,” he said.
According to the IEF information memorandum, the fund is targeting a 15 per cent internal rate of return from an actively-managed portfolio of between eight to 15 businesses accessed via debt or equity.
“The management fee is 2.0% p.a. of the committed capital during the Commitment Period, and 2.0% p.a. of invested capital thereafter,” the IEF memo says.
“The Founding Members [Ākina Foundation, New Ground Capital and Impact Ventures] will earn Carried Interest of 10.0% over a hurdle of 8.0% p.a. return to investors, and 20.0% of returns in excess of 15.0% p.a. return to investors.”