Funds that focus on impact investing have enjoyed dramatic growth in recent years, with 69 percent having been launched since 2009, compared with just 13 percent before 2006, according to a study released this week by the Global Impact Investing Network.

Seventy-two percent of funds in the study are currently open, and only 8 percent are marked completed or closed, according to the study, which analyzed data from 310 impact investment funds that self-report information to the ImpactBase platform.

Private equity/venture capital funds have proven especially attractive to investors, and have driven the growth of impact investing funds., according to the study. They represented about half the funds in the study, while fixed-income and real asset funds made up about 20 percent each.

Seventy-six percent of the fixed-income funds had a social focus, whereas PE/VC funds were about evenly distributed between those that were only socially focused and those that had both social and environmental impact aims.

Impact investment funds in the study subscribed to various themes across six broad categories. Fifty-five percent of funds focus on access to finance, and many choose small enterprises and microcredit sub-themes. Other funds focus on access to basic services, including agriculture and food and education; employment generation; green technology/clean technologies, with energy efficiency a popular sub-theme; environmental markets and sustainable real assets, particularly sustainable land use; and sustainable consumer products.

Ninety-six percent of funds used performance metrics to quantify their social and environmental impact; however, fewer than 100 had been formally rated by a rating system.

Funds in the study had different return philosophies. Nearly one-third of socially focused funds targeted below-market returns, while those with an environmental focus overwhelmingly sought market-rate returns. Some 80 percent of PE/VC funds and all real asset funds targeted market-rate returns, while newer fixed-income funds mostly pursued below-market rates.

Of the 215 funds that reported their target IRR, fixed-income funds had an average target of 4.8 percent, while PE/VC funds strove for 17.5 percent. When these two categories were each analyzed for those with below-market targets, fixed income had an average IRR of 2.9 percent and PE/VC 5.5 percent. And for PE/VC funds that sought market-rate returns, their average IRR was 19.3 percent, while that of their fixed-income counterparts seeking competitive returns was 6.2 percent.

The study found that 76 percent of market-rate funds pitched to family offices and high-net-worth individuals, and 71 percent to foundations. However, only 17 percent of these mainly private funds appealed to the retail market, given their availability only to accredited investors. Seventy-nine percent targeted institutional investors.

As for below-market funds, their greatest appeal was to foundations and to a somewhat lesser extent to institutions and to family offices and wealthy individuals.

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