Case Study - Impact Investment Group’s Impact Alternatives Fund
Impact Investment Group’s new Impact Alternatives Fund is a mix of six different impact investment strategies – renewable infrastructure; impact private equity and VC; impact private debt; social impact bonds and payment by results; environmental assets; and regenerative farming.
IIG chief executive officer Daniel Madhavan said that it was the launch of the WA Impact Fund for WA Super that first made the group consider a multi-strategy investment fund.
What went into launching this product?
We started the design almost going back two years. We have been building a track record in a few different areas, but we’ve always kept them quite separate. When we put the WA Impact Fund together that was the first time we’d really built a multi-strategy product. That was really when we thought there is something here that we could design.
We then went out to market talking to existing clients, advisers and wealth managers and we kept hearing two things – yes there is increasing appetite in impact investing…but the product that is available lacks some features. Those features tend to be around diversification, income yield and liquidity.
The second feedback that we got at the same time, and this was more last year, was a lot of investors saying that they were struggling to either rebalance their portfolios or deploy extra funds [and they would] really like to see things in the alternatives bucket.
What were the challenges in putting the product together?
Getting the right mix of strategies, particularly as you’re mixing investment and impact strategies and it’s a combination of environmental and social impact, so getting that mix right was a lot of work. That was probably the trickiest part of the design.
There was a lot of work done on building out the strategies. We actually started with 15 possible strategies (the fund is a mix of six strategies).
We looked at opportunities and where we thought they were genuine alternatives and where we thought we could have genuine impact. We had to do a lot of testing around where and how we would build pipeline to deploy.
Some areas are fairly straightforward and there are some areas where we will deploy into other managers’ product and there will be some areas where we will need to develop a mandate.
How do you decide on service providers?
We’re pretty much an end-to-end business. We’ve a general counsel and then depending on the specific piece of work we’ve got a panel that we use.
How did you decide on the fee structure?
We tried to keep it as simple as possible. We will pass through the fees of any underlying managers and add 50 basis points. We will discount the fees of any IIG product (when investing via a multi-manager approach) by at least 10 per cent.
Depending on the mix, you end up with a total fee of around 1.25 to 1.75 per cent.