Even as impact investing percolates into the mainstream and some people—in this case, J.P. Morgan—predict big things for the sector, many questions remain about this emerging asset class regarding performance, asset allocation and access for retail investors.

It all made for a day of interesting conversation at Financial Advisor and Private Wealth magazine’s Impact Investing Conference on Sunday in Denver, which is part of the overall Innovative Alternative Investment Strategies Conference. A roster of some of the leading players in impact investing discussed where the industry was, is and likely will be, as financial advisors in attendance sought insights about how to incorporate this asset category into client portfolios.

In a nutshell, impact investing is about achieving both a competitive financial return and a measureable social, economic and/or environmental impact. Most impact investments are structured as debt funds. Some funds place more emphasis on creating an impact than on generating investment returns, and vice versa. So the relationship between the two can get a little squishy, and that can create confusion when it comes to gauging their financial performance.

“You have to be careful how you define rate of return,” said Liz Sessler, senior investment marketing manager at the Enterprise Community Loan Fund. “There’s a balancing act between creating opportunities in the communities we serve and trying to be excellent stewards of capital.”

Sessler manages the Enterprise Community Impact Note, which uses its funds to build affordable housing, community health centers, schools and other facilities in low-income neighborhoods. The minimum investment is $5,000, and interest rates paid on investments range from 1.5 percent for two years to 3.5 percent for 10 years.

“One of the hurdles impact investing needs to overcome is the perception of lower returns across the board,” said Justin Conway, director of investment partnerships at Calvert Foundation, whose Community Investment Note has 6,000 investors channeling capital to about 200 nonprofits and social enterprises around the globe.

The notes have an investment minimum of $1,000, and can be bought either directly or through a brokerage account. They offer fixed-interest returns ranging from 0.5 percent for one-year terms to 2 percent for five-year terms.

“Calvert has been called above average and below average [regarding its investment returns],” Conway said. “It depends on the year. We’re trying to produce stable returns.”

Gloria Nelund, chairman and CEO of the TriLinc Global Impact Fund, cited a study that showed nearly 50 percent of retail investors want to make an impact if they can, but not at the expense of giving up investment returns. “We need to continue creating products that can deliver returns,” she said.

The TriLinc Global Impact Fund, which launched earlier this year, is billed as the first registered impact investing-oriented fund in the U.S. open to non-accredited investors.

The fund is a diversified portfolio of strategic debt investments focused mainly in trade finance, senior secured loans and collateralized loans to expansion-stage companies in the developing world. The fund’s offering size is up to $1.25 billion, and the minimum investment is $2,000. The fund has a targeted annual yield of 6 percent to 7 percent, paid monthly.

For the most part, impact investments have traditionally been the domain of accredited investors. Products from Enterprise, Calvert Foundation and TriLinc are examples of an emerging trend to make them more accessible to retail investors.

Going even lower on the investor food chain is MicroPlace Inc., an online broker-dealer that’s owned by eBay. MicroPlace has democratized impact investing by opening up some impact opportunities to investors for as little as $20. That includes both the Enterprise Community Impact Note and Calvert Foundation's Community Investment Note.

MicroPlace is part of eBay’s e-commerce subsidiary, PayPal, which enables PayPal to become a payment mechanism for an investment account, said Megan Fielding, MicroPlace’s head of investments and business development.

Evolving Category

“[Impact investing] isn’t new,” Nelund said. “What’s new is the label on it as impact investing.”

Nelund noted that impact investing has been around since the 1940s, when it was practiced by the big institutional and sovereign wealth fund crowds. Since then, impact investing has slowly evolved to include high-net-worth investors, has developed a set of performance measurement metrics, and in recent years has attracted interest from large financial institutions such as J.P. Morgan.

In a report last year, J.P. Morgan projected the impact investment category to grow from $50 billion in 2009 to $500 billion in 2014 and then hit $1 trillion in 2020.

Nelund said two big trends are driving impact investing. One is the growing influence of the millennial generation (Gen Y), which as a collective group has shown an interest in using business and finance for the public good. The other is the desire to meet the basic needs of global population growth and address problems such as poverty, lack of education and the environment.

Impact investing is an exciting concept, but people shouldn’t let their hearts lead the way when it comes to putting money into this space. “All of these organizations have a mission and good intentions, and when you get caught up with that it can be intoxicating,” Fielding said. “But I can’t emphasize enough the importance of due diligence to make sure you know what you’re investing in.”