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.”