Family offices and high net worth individuals continue to be among the leading investors in impact investments, despite increasing interest from mainstream financial institutions, according to a new report.
Released by the Global Impact Investing Network (GIIN) and JP Morgan, the sixth annual Impact Investor Surveyfound that wealthy individuals and families accounted for 11% of total capital raised by fund managers.
While pension funds and insurance companies remained the main source of total capital (28.5%), more than two-thirds of fund managers reported raising at least some capital from family offices and foundations.
Impact investing is the practice of investing into companies, organisations, and funds with the intention of generating social and environmental impact alongside a financial return. While market size is yet to be calculated, participants in the study managed more than $77.4 billion in impact assets.
Asia-Pacific ultra-high net worth (UHNW) individuals have shifted their ‘doing good’ allocations towards impact investing in the past three years, according to Asian Philanthropy: An Evolving Landscape- a study by Campden Research, in partnership with Credit Suisse.
Abhilash Mudaliar, research director at the GIIN, said that family office interest in impact investments has continued year-on-year, adding that their interest has led additional players to enter the market.
“More fund managers have raised capital from family offices and high net worth individuals than from any other source. Certainly, more mainstream financial institutions have started to enter the space in recent years, which perhaps offers fund managers a wider array of capital raising sources. There is certainly no indication that family offices are losing interest in impact investing,” he said.
The report estimates that family offices plan to commit approximately $204 million to impact investing in 2016. However, they are more likely to use debt instruments minimally, focusing instead on equity (primarily private equity) and real assets.
Nearly 90% of all respondents said the financial performance of their investments was in line with or above expectations (with 19% reporting outperformance), and 99% reported impact performance in line with or better than expectations (with 27% reporting outperformance).
One anonymous family office respondent said: “Every investment our firm reviews on behalf of clients is assessed for its potential to generate impact. However, those identified as impact investments, whether by the investee or our research staff, are evaluated more closely for their social or environmental characteristics.”
The report is based on a survey of 158 separate impact investing organisations that includes fund managers, foundations, banks, development finance institutions, family offices, pension funds, and insurance companies.
Family offices surveyed in the report typically managed between $55 million and $80 million.