The Emergence of Impact Investing as an Asset Class

Abstract

This study examines private equity (PE) and venture capital (VC) impact investments and their ability to produce financial returns that rival and even surpass the financial returns of traditional funds and comparative indexes. It will define impact investing as its own, viable asset class that produces a blended value of social impact and financial return. This study will use the PE/VC Impact Investing Benchmark created by Cambridge Associates in collaboration with the Global Impact Investing Network. This study will provide an analysis of the data from this benchmark that shows four main findings. First, the number of PE/VC impact investing funds founded each year is growing. Second, the 5-year returns for PE/VC impact investing funds have surpassed the 15-year returns. Third, the returns for PE/VC impact investing funds in both emerging and developed markets are competitive with, and even surpass, some of the returns of comparative indexes. Finally, PE/VC impact investing funds that were founded between 1998 and 2001 offer the highest returns compared to the 15-year returns of the comparative indexes. This study discusses the implications of these results regarding capital allocations and investors, as well as steps for future research on impact investing.