Impact Investing - A promising start

Welcome to GPEI’s Impact Investing thread. The intent of this area is to tease out questions of interest, curious and/or significant developments and proffer, now & then, insights and answers into this emerging investment space. There is no presumed monopoly on good ideas so if a forum for discussion emerges, so much the better.

To start, perhaps a tentative definition of how we at GPEI see the world of ‘Impact Investing’.  This is not intended to be prescriptive, but an attempt to at least frame the subject for discussion. Impact Investing: for some, Impact is the dominant partner in the pairing, to others, Investing is. Not surprisingly, we see Impact as the necessary condition and Investing as the active condition. Impact is the effect of an investment dollar on measurable, socially beneficial goals or metrics. Investing is the deployment of capital for an expected positive return. Hence together, ‘Impact Investing’ is an element or sector within the spectrum of socially responsible investing that seeks to deploy capital for an acceptable level of risk adjusted return while concurrently having benefits environmental and/or social terms. Clearly this is an attractive and potentially powerful concept. 

Impressions from PE on the Road – Europe

One of the great things about INSEAD is its global set up and global reach. Therefore we envisage one stream of this blog to deal with topics on Global Private Equity. By this we don’t mean another aggregation of how big the industry is or how much money was invested but rather local market developments that together shape the worldwide private equity industry. 

Let’s start with a look at Europe - having just spent the last three months on the continent alternating between (too) short spells of holiday and working on a variety of PE related topics. In the latter capacity my colleagues & I met with a large number of senior PE professionals on trips to London, Paris and Munich plus at two conferences on our campus in Fontainebleau and a family office gathering in the South of France (well, not all work).

These meetings, while somewhat biased by the people we approached, chance encounters and an oversampling from our senior alumni in the industry, nevertheless provided a fairly representative sample of GPs at the larger end of the buy-out space. The one observation that stands out is a clear bifurcation of the industry across the PE life cycle – let me share a few comments that were frequently raised:

GROWING WITH GROWTH EQUITY

INSEAD’s center for Private Equity – GPEI for short – is the first stop for PE industry players looking to connect with our school. We wanted to give the center’s fast growing community a chance to interact & engage with us on a regular basis – so welcome to our new PE Blog!

When it comes to transparency, clarity and access to information, the lords of Private Equity (PE) excel as masters of the opaque. Complete transparency, a potential competitive handicap of the public company, is not required of the unlisted. Both the equity and the information related to it are indeed PRIVATE!

The recipe for Growth Equity investing takes a dollop of the aforementioned opaqueness, stirs in the uncertain environment of an emerging market and then seasons liberally with entrepreneurs and investee companies who are unlikely to entertain the mere suggestion of surrendering a majority stake in their firms. The result is a potentially explosive mix. An acquired taste undoubtedly. - Welcome to the world of Growth Equity.