Fund managers and wealth advisors are stretching the definition of impact investing, devising proprietary portfolios comprised of publicly traded securities concentrated on the tenets of ESG-environment, social, and governance factors-and dubbing them impact investment portfolios.
Traditional impact investments are private equity securities, which have little or no secondary market. These investments are typically made by accredited or sophisticated investors who can stand the risk appetite-a la hedge funds-that such illiquidity inures.
Of course there are facilities such as Kiva and Microplace that focus on lower dollar amounts and therefore tiers of investors way below the Gates, Buffetts and other ultra high-net-worth individuals, foundations and institutional investors considered premium impact investors.
And there are socially responsible investments and funds that utilize negative screens to filter out sectors, such as military defense contractors, oil and gas companies, cigarette makers and so on that appeal to retail investors.
But publicly traded ESG portfolios could unleash another realm of investor and, in my mind, will bring in the largest dollar amounts of assets; a tidal wave is waiting.
Lots of investors are looking for alternatives to SRI because these investments are too plain vanilla, and/or because funds that specialize in this area have underperformed. Moreover, the high investment minimum that many private equity funds require ($2 million and up) are out of reach by more mainstream investors.
ESG portfolios put financials first and then kick the proverbial tires looking for good corporate citizenship.
Outside magazine this month has a great feature on the ESG movement (http://www.outsideonline.com/templates/Outside_Print_Template?content=136954738). And I have been privy to a splash of webinar presentations and in-person meetings at big broker-dealers related to the topic.
Smart FAs will stick their hooks into the ESG portfolio proposition. Email me with any questions you might have. ([email protected]) Happy to point the way.
And speaking of new ways, I am proud to announce my new position as editor-at-large with Charter Financial Publishing Network. This strengthens our strategic partnership and will include a series of workshops, webinars and conference initiatives, as well as regular contributions from me to both Private Wealth and Financial Advisor magazine. I'll also be stepping up my blog posts as well.
Stay tuned for some big announcements over the next couple of weeks.