Growing demand from institutional investors for funds tackling environmental and social challenges is leading to new global products offered by leading managers and private equity groups.
Partners Group, the second largest private equity group by market capitalisation, has become the latest buyout group to start such a fund, launching a global $1bn “impact” fund aimed at investing in line with the UN’s sustainable development goals, people familiar with the move said.
Latest figures from the Global Sustainable Investment Review show that the size of the global “impact” market was just under $23tn at the start of 2016. In the UK, leading fund managers, including Allianz Global Investors and Aberdeen Standard Investments, signed a letter agreeing to increase their investment allocation to the so-called “impact” funds in the £150bn market.
Partners Group, based in Zug, Switzerland, will specifically focus on investments that help alleviate poverty, promote good health, quality education, affordable and clean energy and innovation in industry and infrastructure.
The fund has recruited Vuk Jeremić, the former president of the UN General Assembly, to its advisory council.
Cesar Purisima, secretary of finance for the Philippines from 2010 to 2016, and Urs Wietlisbach, co-founder of Partners Group, will also be part of the advisory board.
Existing investors in the group, which include large institutional investors such as Canada’s CPPIB, the state of Texas pension fund and South Korea’s KIC, are said to be targeted to take part in the new impact fund.
Partners Group is expected to hold companies it invests in for 4 to 7 years. It will target returns between 8 per cent and 12 per cent net returns, which is lower than its flagship private equity fund as it will also invest in infrastructure, real estate and loans to companies.
The fund, which will allocate 75 per cent to equity investments, is set to invest alongside the flagship buyout funds in targeting deals that can be as large as $2bn in enterprise value, these people said.
The scope for investing with a mandate to address the UN development goals is huge. Meeting these goals would require investments of between $5tn-$7tn annually from 2015 to 2030 — most of which will require private capital, according to figures by the UN commission on trade and development.
Partners Group, which has $74bn of assets under management, has been cashing in on the growing appetite from investors in private equity. Last year it raised €6bn, twice what the market had expected. Earlier this year it closed a €3bn infrastructure fund, above target expectations.
PG Life, as the new fund will be called, follows a series of impact investment strategies launched recently to cater to an increased demand for such products. Last year TPG recruited U2 singer Bono for its $2bn impact fund. KKR is also planning to raise a similar fund.
The article has been amended to clarify what Partners Group’s new fund will invest in
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