• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to secondary sidebar
  • Skip to footer
  • Subscribe
  • Twitter
  • RSS Feed

Investment News NZ

Investment News provides financial advisers news stories from the financial industry in New Zealand. Subscribe to our free weekly newsletter.

  • Home
  • News
  • Kiwisaver
  • Subscribe
  • About
  • Advertise
  • Contact
You are here: Home / Investment News / Impact with alpha: starring emerging markets private equity

Impact with alpha: starring emerging markets private equity

July 26, 2020

Steven Cowan: 57 Stars co-founder

As reported last week, impact investing is starting to make a dent in NZ with a rash of new funds coming to market this year.

But while NZ investors are, for now, looking to make a difference (and money) in their own backyard, the wider world holds a much deeper set of opportunities for problem-solving impact strategies.

According to Steven Cowan, co-founder of US-headquartered private equity firm 57 Stars, emerging markets, in particular, offer a unique combination of financial and impact ‘alpha’ that enables investors to “do good” and make attractive returns.

Aside from the superior general growth potential (that comes with higher risk) compared to the developed world, emerging markets are over-weight in global issues such as poverty, pollution and poor health.

“You get more impact bang for you buck in emerging markets,” Cowan said. “If you’re concerned about poverty and financial inclusion, for example, then it makes sense to invest where the most challenging and acute problems exist.

“And while the environmental challenge is a global one, it is particularly acute in the places we invest.”

However, he said investors shouldn’t have to give up returns in lieu of achieving impact goals.

“We’re not comfortable with the concessionary approach,” Cowan said. “We believe that the returns from impact strategies should be identical to our other [emerging markets private equity investments].”

Due to visit NZ just before the COVID-19 lockdown, Cowan – along with other senior 57 Stars executives Stephen O’Neill and Carl Balit – said the US$4 billion manager started life about 15 years ago as a private equity fund-of-funds focusing on emerging markets.

More recently, the manager built its more focused impact strategy to co-invest into a pool of underlying emerging market companies that are helping solve some of the world’s most intractable problems.

The 57 Stars co-investing strategy, though, is not a trendy ‘pivot’ to the growing impact market. Cowan said the firm has “development in its blood” with many of the senior partners tracing their origins to the US Federal Government emerging markets funding agency then-known as the Overseas Private Investment Corporation (OPIC)

At OPIC (now the US International Development Finance Corporation), Cowan and other 57 Stars founders helped fund a range of projects in developing countries.

“We were impact before there was a word for it,” he said.

The OPIC experience also opened up Cowan et al to the commercial opportunity for investing in emerging markets at grass-roots level.

Today, the core 57 Stars private equity fund-of-funds strategy invests through a network of about 150 specialist managers with exposure to “several thousand” underlying companies.

The impact strategy targets companies best-suited to solving some of the global challenges as defined by the United Nations Sustainable Development Goals (SDGs).

Specifically, 57 Stars focuses on SDG themes of poverty, healthcare and environment. While companies in the portfolio must have a strong business case (often with a technology-based theme), the manager has also developed a robust impact measurement process.

In addition to using the third-party IRIS+ set of SDG metrics, 57 Stars has built two proprietary tools to measure ‘impact profile’ and the ‘total impact value multiple’ that estimates “the potential dollar value of a company’s impacts”.

Cowan said as one of the few private equity players in emerging markets, 57 Stars has unique connections and insights into investment opportunities.

Even during the COVID-19 crisis many of the firm’s portfolio companies are “doing better than ever”, he said.

The global pandemic has also seen some offshore money exit emerging markets, possibly reducing the competition for dedicated investors.

“Historically, there has been a dearth of capital in emerging markets private equity and the crisis has reduced that further,” Cowan said. “That creates opportunities for us.”

Represented in Australasia by the Sydney-based private equity specialist, Principle Advisory Services, the 57 Stars impact strategy is starting to stir interest across the Tasman. The manager has a wide range of wholesale clients including sovereign wealth funds, pension funds (such as the large US fund CalPERS) and family offices.

Cowan said the 57 Stars crew still planned to make the trip to NZ when the borders reopen, although that may be some months away.

The 57 Stars name, suggested by co-founder Stephen O’Neill’s then eight year-old son, refers to the number of key stars used for celestial navigation. Actually, the list of 57 ignores the most well-known star in nautical history, which sits right on the celestial north pole.

Polaris, better-known as the North Star, stands alone because it easily fixes latitude for navigators (longitude is the tricky one) in the northern hemisphere. Down south in NZ, of course, Polaris is not such a big deal.

 

 

 

 

 

 

 

 

Print Friendly, PDF & Email
Twitter0
LinkedIn0
Google+0
Facebook0

Read More » Investment News

Recent articles

  • Salt diversifies with another AMP Capital hire April 14, 2021
  • FMA draws hard line under fund fees, softens on KiwiSaver advice costs April 14, 2021
  • Passive move activates AMP NZ investment role; double exit at AMP Capital… April 11, 2021
  • … as Ms Fixit comes to the rescue at AMP HQ April 11, 2021
  • Lifetime deadline set for late April April 11, 2021
  • MyFiduciary books first Australian consulting client April 11, 2021
  • Wealth Technologies welcomes aboard two new platform clients April 11, 2021
  • Look inside: why ESG is for managers not just investments April 11, 2021
  • Same time last year: why 2020 was tough for TAA despite record volatility April 11, 2021
Finished reading? Why not subscribe? To receive a weekly email enter your email address here.

Primary Sidebar

WEEKLY NEWSLETTER

Sign up here to receive our weekly newsletter.
Learn More »

Investment News

  • Salt diversifies with another AMP Capital hire April 14, 2021
  • FMA draws hard line under fund fees, softens on KiwiSaver advice costs April 14, 2021
  • Passive move activates AMP NZ investment role; double exit at AMP Capital… April 11, 2021
  • … as Ms Fixit comes to the rescue at AMP HQ April 11, 2021
  • Lifetime deadline set for late April April 11, 2021
  • MyFiduciary books first Australian consulting client April 11, 2021
  • Wealth Technologies welcomes aboard two new platform clients April 11, 2021
  • Look inside: why ESG is for managers not just investments April 11, 2021
  • Same time last year: why 2020 was tough for TAA despite record volatility April 11, 2021
  • Veteran exit triggers NZ Super management rejig April 11, 2021

Search by Keyword

Most Recent Investment News

Salt diversifies with another AMP Capital hire

April 14, 2021

FMA draws hard line under fund fees, softens on KiwiSaver advice costs

April 14, 2021

Passive move activates AMP NZ investment role; double exit at AMP Capital…

April 11, 2021

… as Ms Fixit comes to the rescue at AMP HQ

April 11, 2021

Lifetime deadline set for late April

April 11, 2021

Investment News Archive

Most Popular Articles

  • NZ share-trading splurge could trigger tax alarms… posted on October 5, 2020
  • Westpac NZ flags retail advice sale to Forsyth Barr posted on October 19, 2020
  • Flint set to spark platform competition posted on August 17, 2020
  • The horror year in technicolour: free KiwiSaver 13 report released posted on September 30, 2020
  • Four to the core: Smartshares to expand, rearrange and reprice ETFs posted on June 22, 2020
  • NZ Funds directors back on board posted on April 24, 2016
  • Kitset KiwiSaver scheme set to unwrap in spring posted on April 27, 2020
  • Kiwi Wealth hits the bigger time posted on November 26, 2017

Sponosored Content

Responsible goes retail: why Mint has opened the SRI tin

David-Boyle

Jumping lessons: what all investors can learn from GameStop loss

What do ‘Kiwi’ experts see for 2021?

David-Boyle

On the industry play-list: four chart-topping regulations for 2021

Quick-links to Popular News

  • FAP Compliance
  • Coronavirus
  • New Appointments
  • Financial Markets Authority (FMA)
  • Kiwisaver
  • Climate Change
  • Crypto Currency
  • Blockchain
  • Insurance

Secondary Sidebar

Recent News

  • Salt diversifies with another AMP Capital hire April 14, 2021
  • FMA draws hard line under fund fees, softens on KiwiSaver advice costs April 14, 2021
  • Passive move activates AMP NZ investment role; double exit at AMP Capital… April 11, 2021
  • … as Ms Fixit comes to the rescue at AMP HQ April 11, 2021
  • Lifetime deadline set for late April April 11, 2021
  • MyFiduciary books first Australian consulting client April 11, 2021
  • Wealth Technologies welcomes aboard two new platform clients April 11, 2021
  • Look inside: why ESG is for managers not just investments April 11, 2021
  • Same time last year: why 2020 was tough for TAA despite record volatility April 11, 2021
  • Veteran exit triggers NZ Super management rejig April 11, 2021

Footer

Copyright ©2020 InvestmentNews.co.nz — All Rights Reserved ·— Terms & Conditions