Bron
Deloitte
A new report out from Deloitte’s Center for Financial Services argues that now is the time for hedge funds to consider impact investing. Report authors suggest that impact investments can provide a new source of alpha in an otherwise challenging market for hedge funds.
Impact investing: A win-win for hedge funds
Impact investing can be defined as “the intentional allocation of capital to generate a positive social or environmental impact that can be—and is—measured.” It blends the earlier concepts of investment screens and social selection criteria with the newer enhancements of intentionality and impact metrics.
Hedge fund managers have been slow to adopt impact investments, however as the industry faces performance challenges, it may be time to take a closer look at how this type of investing may support alpha generation. Not only will it propel hedge funds higher on the social spectrum, but impact investments can allow hedge funds to competitively differentiate. Impact investing marries environmental, social, and corporate responsibility with a sustainable strategy.
The value of impact investments for hedge funds
The lack of a clear hedge fund leader in impact investing suggests there may be open space for early movers to gain a competitive advantage. The biggest value proposition for this strategy is that a growing class of investors wants to see these types of products within their suite of investment options. The value-add to managers is not only about interest in a specific fund, but also about how this creates opportunity to bring in new clients and deepen relationships with existing clients. Competition is fierce and any opportunity to show responsiveness to investor demands while being first in an untapped market is key.
Five considerations for impact investing by hedge funds
