bfinance: DNA of a Manager Search - Impact Private Debt
bfinance: DNA of a Manager Search - Impact Private Debt
The ‘Impact Private Debt’ sector has undergone a particularly significant phase of expansion during the past two years. Private Credit fund managers have followed closely behind their Private Equity counterparts as they seek to tap into the large and growing universe of institutional investors who are putting impact intentions into practice.
Following a raft of new launches, there are now well over one hundred Private Debt strategies purporting to deliver impact, some more explicitly than others; this universe becomes far larger when we consider segregated account options and not-yet-launched vehicles alongside existing pooled funds.
In this paper, we seek to bring to life some of the opportunities, difficulties and debates within Impact Private Debt investing through an illustrative manager search focused on European Direct Lending (page 8 onwards). In addition, we provide a bird’s eye view of the broader environmentallyoriented Impact Private Debt landscape (pages 6-7)—including Infrastructure Debt, Real Estate Debt and more—to provide insights on the current investible universe.
The space is a highly diverse one. Some funds have a specialised focus, lending only to companies, projects or assets that address specific impactrelated themes; others work with a broader range of potential borrowers with a message that they can deliver impact by driving change in the underlying companies. Both investment credibility and impact claims must be scrutinised with care: not all prospective candidates are true impact strategies and branding/labelling is not necessarily helpful in guiding allocators on this subject.
The manager search case study presented in this report takes a journey through the implementation of a large mandate, beginning with market landscaping in an ever-growing field and progressing to the assessment of prospective managers and detailed due diligence. We ask: how is impact defined and how can the credibility of impact strategies be assessed? How can investors gain comfort on track records, fundraising risk and more in a nascent asset class? What are the key points of differentiation between asset managers’ approaches?
This article is the latest in a series of reports focused on the practicalities of impact investing: previous publications have covered Impact Private Equity, Impact Real Estate, Natural Capital, Public Equity and more. These reports are designed to support asset owners—pension funds, endowments, insurers, family offices and others—and the broader investment community with insights on implementation in today’s market.
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