Q&A: Community Investment Management Emerging Markets Credit Strategy
Insights below are from ImpactAssets Capital Partners PB LLC, a wholly-owned subsidiary of ImpactAssets that is a registered investment advisor. ImpactAssets Capital Partners advises ImpactAssets regarding the ImpactAssets Investment Platform. These insights should only be relied upon for donor advised fund decisions and not any personal investment decisions.
Q: Why did ImpactAssets select this strategy for the ImpactAssets Investment Platform?
Our continued goal is to provide our community with access to diversified investment opportunities and demonstrated impact. This private debt strategy is dedicated to investing in innovative credit providers and financial technology companies that increase access to capital for underserved demographics. For donors focused on achieving meaningful, on-the-ground social impact, this opportunity represents a well-suited offering from an existing relationship and performing institutional manager, Community Investment Management (CIM). The emerging markets strategy is an extension of CIM’s proven U.S.-based asset-backed lending strategy. Notably, the emerging markets strategy offers high liquidity features (monthly redemptions with no lock-up period) and is also expected to deliver market-rate financial returns.
Q: What's exciting to you about the strategy's impact thesis?
The strategy is expected to generate strong impact both directly and indirectly – by increasing access to credit for underserved communities and by developing ecosystems for responsible credit products, respectively. Together, these interventions will promote equitable economic growth, job creation, and the health and financial sustainability of local communities, both for small businesses and low- or medium-income households.
Q: Key insights from the due diligence process?
Emerging markets are often more volatile than developed markets, which is why investing in them requires consideration of additional factors such as political risks, macroeconomic impacts and currency fluctuations. This strategy is unique as it targets geographic markets with the appropriate legal and regulatory frameworks that allow for the effective mitigation of those risks. CIM’s robust risk management also includes the creation of customized loans that are structured to align with the lending partner’s maturity and lending products offered. As a result, the lending partners are de-risked as investments over time, which in turn allows them to scale and access lower costs of financing from other capital providers. At the same time, investors benefit from strong principal protection of their capital. CIM is disciplined and conservative, providing benefits to both its investor partners and lending partners.
Q: Who is this strategy appropriate for?
From a risk and return perspective, this strategy may be an excellent option for donors pursuing a moderate risk strategy for their donor advised fund accounts and who are seeking market-rate returns and liquidity. From an impact perspective, the strategy provides both tangible benefits to underserved communities in emerging markets and offers positive externalities such as the development of fintech markets in local economies and the expansion of globally inclusive financial systems.
LEGAL AND PROGRAM DISCLAIMER: This is not a solicitation to buy or sell securities to any person, which may only be made pursuant to a private placement memorandum or other disclosure document issued to qualified investors. Any securities mentioned herein have not been approved or disapproved by the Securities and Exchange Commission and may be subject to restrictions on the manner in which they may be offered and to whom they may be offered. This may include limiting purchasers of such securities to “accredited investors,” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended, who are (in the case of securities issued by certain pooled investment vehicles) “qualified clients,” as defined in Rule 205-3 of the Investment Advisers Act of 1940, as amended, as well as other restrictions. This publication is an informational description of a charitably oriented, social purpose investment option that has been approved by ImpactAssets for the donor advised funds that it administers and not for any other purpose. It may only be used by ImpactAssets' donors to allocate funds in their donor advised fund accounts and may not be used for any other purpose, including personal investments. Any allocation to private debt and equity investments may result in losses and illiquidity that will be borne solely by each donor advised fund account that makes such investments. Such allocations may be subject to program fees paid to ImpactAssets that reduce the net returns that donor advised fund accounts receive. Investment minimums may apply. Grant making from a donor advised fund account's principal value will not be possible until distributions are returned from an investment. There is no guarantee of any recovery of capital and no assurance can be given that investment objectives or targets/projected returns will be achieved. The issuer of any securities described herein and, if applicable, any related fund manager have not approved the information contained in this profile, including any assignment of risk ratings contained herein.