Private markets impact investments, while underperforming compared to investors’ targets, are outperforming traditional investments, according to research from GIIN.
GIIN compiled responses from 429 organisations for its latest State of the Market report, released on Wednesday. Of those to have made impact investments, two-thirds were investment managers, with the rest a mix of foundations, development finance institutions, family offices, corporations and others.
Investors targeted a 16 percent return from their private equity impact investments on average, but only achieved an 11 percent return, the results show. It is similar story in impact real assets, which delivered a return of two percent against a seven percent target. The figures were closer in impact private debt, with returns falling just 1 percent below the 8 percent target.
It seems likely that this underperformance reflects broader market trends, rather than anything specific to impact. Both private equity and real asset impact investments outperformed traditional investments in the same asset class, while in private debt the figures were equal.
Across all three asset classes, respondents set a higher average returns target for impact than traditional investments.
Despite failing to live up to expectations, investors are largely satisfised with the financial performance on their investments. Nearly three-quarters (73 percent) of respondents reported being either very or somewhat satisfied with the financial performance of their investment.
Investors are even more pleased with their investments’ impact performance: just 10 percent reported being less than satisfised.