Real Assets Financial Performance Research Roundtable Session
Transcript of Real Assets Financial Performance Research Roundtable Session
1
Aliana Pineiro
OFN Conference
September 27, 2017
Real Assets Financial Performance Research
Roundtable Session
2
Today’s agenda
• Overview of the GIIN
• Real assets financial performance presentation
• Q & A
• Round table discussions
• Share discussion highlights
3
Global Impact Investing Network
ImpactBase• Profiles of 400+ funds investing across geographies, asset classes,
and impact themes• Free access to 2000+ accredited investors
IRIS & IMM• A taxonomy of 450+ social / environmental performance metrics• Incorporated into leading tools and frameworks, including GIIRS
and SROI
Membership• Investors’ Council: 54 impact investing leaders• Network Members: ~200 members
Training• Training for new fund managers, especially in emerging markets• Topics include: fundraising, fund economics, impact
measurement
Research• Practitioner-oriented research to fill market gaps• Focus on market studies, performance, and practice
4
5
Methodology
6
Data collection – financial performance
Data Sources
> 300 funds identified
129 funds targeted for
inclusion
55 funds
Data Collection Process
7
Data collection – impact objectives and metrics
• Basic impact related data collected from ImpactBase and fund
manager impact reports and websites
• Data includes impact objectives, impact measurement system,
third-party certification, and impact metrics tracked.
8
Sample Characteristics
9
Three sector benchmarks
Timber Real Estate Infrastructure
Number of
Funds18 20 17
Capitalization
USD million4,053 4,657 9,089
Sample
Impact
Objectives
• Sustainable Timber Management
• Land Conservation /Restoration
• Biodiversity Conservation
• Green Real Estate
• Affordable Housing
• Community Services
• Renewable Energy Generation
• Climate Change Mitigation
• Water Resource Management
As of June 30, 2016
10
Distribution of Fund IRRs Net to LPs by QuartileAs of June 30, 2016 Performance (%)
Notes: IRRs are in USD and are net of fees, expenses, and carried interest. Percentile rankings are based on a scale of 0 - 100 where 0 represents the highest value and 100 the lowest. Source: Cambridge Associates LLC | Copyright © 2017 by Cambridge Associates LLC. All rights reserved.
Financial Performance
-35
-25
-15
-5
5
15
25
35
Real EstateImpact Investing
Benchmark
Comparative RealEstate Universe
InfrastructureImpact Investing
Benchmark
InfrastructureBenchmark
(Non-Impact)
Private EquityEnergy
Benchmark
-35
-25
-15
-5
5
15
25
35
Timber ImpactInvesting
Benchmark
ComparativeTimber
Universe
n=18 n=24 n=20 n=618 n=17 n=60 n=162
Pooled net IRR
11
Real Estate Impact Investing Benchmark
12
Impact Objectives
16
11
8
54
0
2
4
6
8
10
12
14
16
18
Green real estate Affordable housing Energy efficiency Employmentgeneration
Community servicesfor residents
Real Estate Top Impact Objectivesn = 20; Funds may target more than one impact objective
13
Impact Objectives and Metrics
Metrics for tracking progress toward impact objectives
Impact Objective Metrics used
Green real estateEnergy efficiency
• Gallons of water conserved• Watts of energy conserved• LEED certification• Watts of energy conserved• Energy Star certification
Affordable housing • Number of affordable units• Average income level of tenants
Employment generation • Number of jobs created
Community services for residents • Number of residents provided with social services
14
Real Assets Impact Investing Benchmark & Comparative Universe Characteristics
Real Estate Benchmark n = 20; Capitalization USD 4,657 million
Comparative Universe n = 618; Capitalization USD 499,630 million
15%
35%
50%
32%37%
31%
0%
10%
20%
30%
40%
50%
60%
2004-2006 2007-2010 2011-2014
Fund count by Vintage Year
Impact Investing Benchmark Comparative Universe
15
Real Assets Impact Investing Benchmark & Comparative Universe Characteristics
Real Estate Benchmark n = 20; Capitalization USD 4,657 million
Comparative Universe n = 618; Capitalization USD 499,630 million
30%
40%
30%
5% 6%
19%
70%
0%
20%
40%
60%
80%
<=50 50-100 100-250 250+
Fund Count by Size
Impact Investing Benchmark Comparative Universe
16
Real Assets Impact Investing Benchmark & Comparative Universe Characteristics
Real Estate Benchmark n = 20; Capitalization USD 4,657 million
Comparative Universe n = 618; Capitalization USD 499,630 million
60%
25%15%
77%
6%17%
0%
20%
40%
60%
80%
100%
Diversified Real Estate Residential Multi-Family Other
Sub-sector Focus
Impact Investing Benchmark Comparative Universe
17
Distribution of Returns
0%
25%
10%
20%
5%
10%
30%
5%
10%11%
17%15%
20%22%
0%
8%
15%
23%
30%
38%
<-15% -15% to -5% -5% to 0% 0% to 5% 5% to 10% 10% to 15% >15%
Per
cen
t o
f Fu
nd
s b
y C
ou
nt
(n)
IRR Range
Real Estate Impact Investing Benchmark
Comparative Real Estate Universe
Notes: IRRs are in USD and are net of fees, expenses, and carried interest. Source: Cambridge Associates LLC | Copyright © 2017 by Cambridge Associates LLC. All rights reserved.
As of June 30, 2016
18
Performance by Fund Size
10.2
3.9
-0.9
6.36.8
6.1
4.8
-2
0
2
4
6
8
10
12
<50 50-100 100-250 250+
Real Estate Impact Investing Benchmark
Comparative Real Estate Universe
Impact Funds (n) 6 0 8 6
Comparative Funds (n) 31 39 117 431
Notes: IRRs are in USD and are net of fees, expenses, and carried interest. Source: Cambridge Associates LLC | Copyright © 2017 by Cambridge Associates LLC. All rights reserved.
As of June 30, 2016 Pooled IRR (%)
19
Equal-Weighted Performance by Vintage Year
Impact Funds (n) 3 7 10 20
Comparative Funds (n) 196 230 192 618
-2.8
2.8
14.0
3.8
0.2
8.4
12.7
4.9
-5
0
5
10
15
2004-2006 2007-2010 2011-2014 Full Period
Real Estate Impact Investing Benchmark
Comparative Real Estate Universe
As of June 30, 2016 Equal-Weighted IRR (%)
Notes: IRRs are in USD and are net of fees, expenses, and carried interest. Source: Cambridge Associates LLC | Copyright © 2017 by Cambridge Associates LLC. All rights reserved.
20
InfrastructureImpact Investing Benchmark
21
Impact Objectives
16
4 4
2 2
0
2
4
6
8
10
12
14
16
18
Renewable energy Energy efficiency Water resourcesmanagement
Climate changemitigation
Employmentgeneration
Infrastructure Top Impact Objectivesn = 17; Funds may target more than one impact objective
22
Impact Objectives and Metrics
Metrics for tracking progress toward impact objectives
Impact Objective Metrics used
Renewable energy • MW of renewable energy generated
Energy efficiency • Reduction of CO2 emissions
Water resources management • Cubic meters of water conserved• Acre feet of water replenished to aquifers
Climate change mitigation • Reduction of CO2 emissions
Employment generation • Number of jobs created
23
Benchmark Characteristics
68%
16%
16%
Capitalization by Geographic Focus
U.S.
DevelopedMarkets ex U.S.
Emerging Markets
3
8
6
0
2
4
6
8
10
<100 100-500 >500
Fund Count by Size
5 5
7
0
2
4
6
8
2005-2007 2008-2010 2011-2014
Fund Count by Vintage year
24
Performance by Vintage Year
Impact Funds (n) 5 5 7 17
-9.7
5.5 6.2
0.3
5.6
8.6
10.5
6.65.6
0.6
2.73.8
-12
-10
-8
-6
-4
-2
0
2
4
6
8
10
12
2005-2007 2008-2010 2011-2014 Full Period
Infrastructure Impact Investing Benchmark
Infrastructure Benchmark (Non-Impact)
Private Equity Energy Benchmark
As of June 30, 2016 Pooled IRR (%)
Notes: IRRs are in USD and are net of fees, expenses, and carried interest. Source: Cambridge Associates LLC | Copyright © 2017 by Cambridge Associates LLC. All rights reserved. n
25
Performance by Fund Size
11.8
-1.9
0.9
5.3
8.3
6.5
11.2
2.8
3.9
-4
-2
0
2
4
6
8
10
12
14
<100 100-500 500+
Infrastructure Impact Investing Benchmark
Infrastructure Benchmark (Non-Impact)
Private Equity Energy Benchmark
26
Key Findings
1 | Market rates of return are achievable in impact investing
2 | Fund selection is the key to success
27
Q & A
28
Group Discussion
• How is this type of data helpful to you in your work? Would
benchmarks help in fundraising?
• What tools are available to the CDFI industry for evaluation of risk
and return? What additional resources or information do you
need?
• How could financial performance studies be used to help CDFI
funds improve investment strategy? Are there any major risks to
conducting these studies?
30
Criteria for inclusion
• Structured as private, fixed-term limited partnerships
• Invested with the intent of generating positive social and/or
environmental impact
• Investing in real assets
• Targeting market rate investment returns
• Vintage year 2014 or earlier