The Trillion Dollar Investment Opportunity

Saturday, March 17, 2012

If you are familiar with Boardwalk Capital, you know that our business provides a different type of investment management. We focus a great deal of attention on finding large companies who are exemplary corporate citizens, building strategies from a pool of these well-run, forward thinking companies.

To create a full sustainable portfolio, however, we bring in other asset types such as bonds, commodities, and specialty equity investments -- all with an overarching theme of responsible and profitable investing.

Within the "specialty" category, one finds what are now referred to as Impact Investments -- companies organized to meet a societal need and turn a profit while doing so. It is a remarkable business model that was described by JPMorgan as the next big asset class. They called it "A One Trillion Dollar Investment Opportunity".

Last week, I had the great pleasure of meeting with three groups of entrepreneurs doing some of this very important work. It became clear to me that the folks at JPMorgan are on to something. Bringing corporate experience and a profit motive to what was previously the work of non-profits is a powerful combination. And interestingly, a onetime investment results in years of benefit, thanks to the recycling of profit back into the business. It's like a good deeds perpetual motion machine.

These investments are, of course, not without risk. Portfolio investors can participate at different risk levels some resembling fixed income (less risky) and others that are more like private equity (illiquid and far riskier). Most often these are accessed through pooled vehicles that diversify the risk of any single investment. In all cases, investors can connect with the companies in which they invest, creating a deeper, richer investment experience.

Organizations such as Kiva (kiva.org) have become quite popular with investors by doing just what I described -- connecting people with one another through small loans (often just $25).The power of knowing that your $25 will help a Wilson, a Kenyan farmer purchase livestock or Grace, a Pilipino clothing maker buy fabric, has been a powerful draw for investors as an alternative form of philanthropy. Kiva's 98.9% repayment rate keeps them coming back.

While Kiva is among the most well-known entities in the microlending space, other organizations are taking this a step further, offering the potential of profits or interest income to the investor while dealing in larger investable sums. Groups such as Gray Ghost Ventures, RSF Social Finance and Village Capital are each trying a different angle on empowering and unleashing entrepreneurs to profitably address some of the world's most vexing problems. Hundreds, if not thousands, like them are operating with little fanfare but with great impact.

Boardwalk Capital's role in this investment segment is threefold:

1. We research and recommend to our clients investments in pooled vehicles that promise a reasonable risk-adjusted return with a societal benefit.

2. We communicate with our clients on both the financial and social impact of these investments, focusing on specifics.

3. We take 10% of our fees and direct them to charitable or impact investment activities.

This commitment to communicate with investors reflects our unique sustainable investment approach, and is carried over to other asset types, as well. Know what you own, how it is doing, and how that investment is providing financial and societal benefits. Impact investments are just one highly visible "grass roots" part of a sustainable and responsible investment portfolio.

B. Scott Sadler, CFA -- President, Boardwalk Capital Management

Source: http://thesustainableinvestor.blogspot.com/2012/03/trillion-dollar-investment-opportunity.html?utm_source=twitterfeed&utm_medium=twitter