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Great Expectations: Mission Preservation and Financial Performance in Impact Investing

By June 7, 2017Library

Given the pressure to find liquidity, GPs may face tradeoffs between maximizing financial returns and ensuring the preservation of portfolio companies’ missions, and therefore, many wonder if GPs will sacrifice mission in exchange for financial returns.

Impact investing provides investors opportunities to generate social and environmental value through their investable assets. Over the past decade, limited partners have increased capital allocations to socially driven private equity funds. In turn, these funds have increased investment in mission-driven portfolio companies with the goal of increasing the size of their revenues and assets, and the scope of their impact. As funds mature, the general partners (GPs) who manage them must nd liquidity in their portfolio(s) in order to provide returns to their limited partner (LPs) investors. For impact fund managers, the pressure to find liquidity may be particularly pronounced since the impact industry remains nascent and relatively unproven. In fact, the eld is so new that critics and supporters see every exit as a proof point. Given the pressure to nd liquidity, GPs may face tradeoffs between maximizing financial returns and ensuring the preservation of portfolio companies’ missions, and therefore, many wonder if fund managers will sacrifice mission in exchange for financial returns.

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