Demand From Investors for Investment Managers to Demonstrate Additional Value Beyond Traditional Risk & Return Considerations

May 12, 2020 1:15 PM ET
Article

We are experiencing a transition to an era where total social benefit is becoming an increasingly important metric for the perceived value of products and services. Consequently, the investment industry is risking its enduring relevance and credibility by assessing and subsequently rewarding success through solely financial metrics.

In this segment, experts discuss the demand from investors for investment managers to demonstrate additional value beyond traditional risk & return considerations.

"From our perspective demand is increasing, however still a long way to go. If I would look at our portfolio which includes 800 GP’s, less than 4% of them have strategies are required to have KPI’s that create some sort of value beyond risk/return financial metrics and less than 30% of our portfolio includes outcomes ba sed targets. If you consider yourself an impact fund, and aim to have EIF as an LP - and as a reminder we have 800 GPs in Europe, you are required to have your carry aligned with non financial impact KPI performance."

THOMAS L. FERRE
Private Equity Mandates European Investment Fund

"We see four categories of client demand: Firstly, a client with existing mechanisms to make good investment decisions which have positive outcomes, secondly a generational transfer of wealth and responsibility acting as a catalyst for seeking to allocate to investment strategies which have a positive impact on society, third category is family offices who are starting to get interested in allocating to more outcomes focused products but being frustrated with the lack of clarity of how to measure and then select managers. Finally, the fourth that is engaged only in capturing financial returns, with little regard for their positive or negative outcomes."

SIMON FINCH
Investment Consultant Enhance Group

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About Acre

Acre provides global financial institutions and investors access to the most established network of talent to build teams that not only outperform the markets, but also support the transition to a sustainable economy. Acre’s pioneering work in responsible investment, sustainable finance and impact investing has created the largest global recruitment network of its kind. To get in touch with them, email impactinvesting@acre.com, or visit acre.com/impact-investing