Great Expectations: Mission Preservation and Financial Performance in Impact Investing

Abstract

Over the past decade, limited partners have increased capital allocations to socially driven private equity funds with the goal to generate long-term impact alongside financial returns. To understand funds' abilities to meet these goals, we gather detailed mission and financial data from 53 impact investing private equity funds, representing 557 individual investments. In our sample we find that while fund managers are overwhelmingly optimistic about mission preservation, few exits have any contractual statements about preserving mission. Regarding financial performance, our set of market-rate-seeking funds achieved gross results comparable to non-impact investment options along a broad range of measures, suggesting it is possible to generate market returns as an impact fund.

Keywords: impact investing, private equity, venture capital, social impact, financial performance, mission preservation, gross performance, transactions, exits

JEL Classification: G12, G24, M14