Purpose-driven investment firm RisCura is applying its institutional investment experience to impact investing and has launched the country’s first Impact fund of funds series.
The firm says this is in line with the globally recognised definition of impact investing “to generate positive, measurable social and environmental impact” within South Africa, while still delivering competitive investment returns.
The impact funds in this series focus on unlisted debt, unlisted property and unlisted equity.
“Retirement funds and other institutional investors are not blind to the myriad social and developmental needs facing South Africa. But finding ways to invest their pools of capital to directly address these issues is not always easy,” says RisCura MD Malcolm Fair.
“We’ve always focused on helping our clients to find ways to ensure their members are financially secure when they retire or fall ill. But what if the environment and society they retire into are on the point of collapse or the health system they need to rely on is failing?
“This is the question driving us to create new solutions for our clients. Sustainable financial returns can only be generated and later used in a healthy society and environment,” he adds.
Experienced in establishing and managing technically intricate portfolios, the fund has launched after months of extensive work in modelling this impact solution with input from asset managers, institutions and local experts in the field.
RisCura’s series of impact investments for institutional investors uses a fund of funds structure.
“Using a fund of funds structure enables us to create a pooling mechanism for long-term impact capital that can provide a stable source of funding for commercially competitive impact and development projects that align to both South Africa’s National Development Plan (NDP) and the United Nations (UN) Sustainable Development Goals (SDGs).
"The fund of funds structure also helps to manage risk. Imagine if you have only invested in one fund and it experiences a disastrous credit event. This could wipe out 5% to 10% of the portfolio. In a fund of funds, this risk is mitigated through diversification as the number of counterparties multiplies,” says Fair.
Unique to these funds is their liquidity, despite being primarily invested in unlisted instruments. Investing in the unlisted space often means long initial investment terms of seven to ten years, whereas RisCura’s funds will have much shorter initial investment periods, whereafter the products have innovative design features which work to provide short-term liquidity.
“Liquidity has long been an issue for smaller institutional investors who often balk at the long investment terms of, for example, many private equity funds. By introducing specific liquidity provisions, we hope to ease concerns around the practicalities of investing into unlisted investment vehicles,” indicates Fair.
The RisCura funds will also explicitly measure and monitor the impact they are having in each of the priority investment themes.
“There is a great need for impact capital and part of our intention in developing this series of funds, is to help to support and grow the impact investment industry in this country. We want more asset managers to have funds that are explicitly focused on making an on-the-ground and measurable impact on the lives of South Africans, for the good of South Africans,” says Fair.
By mapping the objectives of the NDP to the targets and objectives of the UN SDG, RisCura identified eight priority investment themes to invest in.