rodolfo fracassi-tbli nyc may 2014

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  • Impact Investing: addressing the liquidity issue

    Presentation for:

  • Created in 2008 to become a catalyst for sustainable investments in micro, small and medium businesses, MainStreet

    Partners is an independent financial boutique that offers tailored solutions to Institutional Investors and Private Banks

    that are willing to allocate financial resources in the Impact Investing space in order to achieve a mix of financial,

    environmental and social returns.

    MainStreet Partners team has developed a reliable methodology for the research and assessment of investment

    opportunities in the different fields characterizing Impact Investing, both in developed and developing countries. Driven

    by a real commitment to social and environmental Impact Investing, our team offers a full spectrum of services,

    including:

    - Research and Due Diligence

    - Portfolio Structuring

    - Asset Allocation and Investment Selection

    - Monitoring

    Our abilities to propose and implement innovative solutions with a long-term partnership approach is our added value,

    while our in-depth on-going research effort represents a continual commitment to assess the fast growing impact

    investing industry.

    2

    MainStreet Partners

  • Bamboo Finance

    Microfinance Alliance

    Bamboo Finance

    Oasis Fund

    Incofin IM

    Rural Impulse Fund II

    responsAbility

    Leaders Fund

    Fund Raising

    Headquartered in London, MainStreet Partners is regulated by the Financial Conduct Authority and is

    member of the Sustainable Investment and Finance Association (UKSIF)

    To date it has participated as an advisor for the structuring, investment selection and placement of the

    following impact investment vehicles:

    Fondazione Cariplo

    Microfinanza Uno

    Banca Fideuram

    Fonditalia Ethical Investment

    Uman Foundation

    Uman Positive Impact Fund

    Corporation Financire Europene

    Sustainable Trade Finance Strategy

    Structuring and Investment Selection

    3

    Our credentials

  • Responsible investment strategies experienced high growth over the recent past among institutional

    investors, but engagement of retail investors has been limited

    Breakdown of assets by type of investor *

    94%

    6%

    Institutional Retail

    Within responsible strategies, impact

    investments show a similar split:

    92% Institutional

    8% Retail

    *Source: EuroSif SRI Study 2012, and team analysis 4

    Institutional investors dominate the responsible

    investments area

  • Number of Vehicles 380 9

    A recent research by JP Morgan GIIN* report estimates the size of the impact investing market globally

    around USD 46 billion.

    Vehicles available to

    Qualified Investors

    Vehicles available to

    Retail Investors

    Average AUM 100 354

    (1) Impact investment funds and notes distributable to retail investors (excluding themed bonds and social bonds): responsAbility Global Microfinance Fund,

    responsAbility Mikrofinanz-Fonds, responsAbility Fair Trade Fund, ASN Novib Microcredit Fund, OikoCredit Fund, Calvert Foundation-Community Investment Notes,

    Finca Notes, Threaneedle Social Impact Fund, Fideuram Fonditalia Ethical Investment

    Source: Pacific Community Venture research 2012, and team analysis

    *JP Morgan GIIN Report January 2014

    5

    Impact investment vehicles(1) available to retail investors

  • 21% 20%

    12% 10%

    6% 5%

    4% 4% 4% 4% 3%

    2% 2%

    Pay Principal Back

    Address a cause I care about

    Business Model

    Brand Other

    Private investors are increasingly seeking investments that express their values beyond targeting a

    financial return:

    Impact investments create the emotional connection between investors and investees

    Selected impact vehicles show solid track record and low correlation

    Track Record

    Source: Hope Consulting, Realising the Market Potential for the Impact Investing Market, May 2011 6

    What drives private investors choice?

    Impact investments are gaining momentum among

    private investors

  • Small investments: 85% of private investors would invest less than USD 10,000

    Engage Banks and Distribution Platforms: private investors prefer to learn and access impact

    investments through their financial advisors

    27%

    12%

    10% 10% 9%

    7% 7% 7%

    5% 4%

    2%

    Financial Advisors

    Online research, direct dealing, other tools

    Where do private investors learn and execute transactions?

    Source: Hope Consulting, Realising the Market Potential for the Impact Investing Market, May 2011 7

    Structures and Distribution Channels

  • Opportunities Challenges

    Size

    Reach a large number of investors

    Quickly scale assets

    Liquidity

    Retail investors prefer liquid assets

    Most impact investments lack liquidity

    Stability

    Private individuals invest long term

    Especially in the impact investing area

    Regulatory Framework

    Impact vehicles are not authorised for

    distribution in most countries

    Branding

    Brand awareness

    Positioning

    Structure / Distribution Channel

    Develop new products and services

    Engage the right distribution channels

    8

    Opportunities and challenges of the retail market

  • 9

    A spectrum of retail investment solutions

    There is a growing availability on the market of retail investment vehicles offering daily to monthly liquidity, such as:

    Information provided only for illustrative purposes, the same do not represent an incentive or promotion to the instruments presented. Past

    returns do not guarantee future yields.

  • AuM USD 100 mln Loans average maturity:

    90 days Fund liquidity: Monthly

    Seeding Fertilization Harvest Export Consumer

    Agricultural Producers Cooperative

    Repayment of capital plus interests Financing

    Information provided only for illustrative purposes, the same do not represent an incentive or promotion to the instruments presented. Past

    returns do not guarantee future yields.

    10

    Fair Trade example: responsAbility Fair Trade Fund

  • 11

    Community Development example: CRA Qualified

    Investment Fund

    CRA Qualified Investment Fund Retail Shares has been launched by Community Capital Management

    (CCM) in 2007:

    Investments have to be qualified under the Community Reinvestment Act (CRA)

    It invests in a) rental housing units, b) home mortgages for low- to moderate-income families, c)

    affordable healthcare facilities either trough investments

    1. in MBS backed by the US government, or

    2. certificates of deposit issued by Community Development Financial Institutions

    Daily liquidity

    Mortgage Backed Securities

    Information provided only for illustrative purposes, the same do not represent an incentive or promotion to the instruments presented. Past

    returns do not guarantee future yields.

    1

    2

  • Information provided only for illustrative purposes, the same do not represent an incentive or promotion to the instruments presented. Past

    returns do not guarantee future yields.

    Managed by Threadneedle and advised on social impact by Big Issue Invest

    Retail fund with daily liquidity authorized for distribution in the UK

    Invests in bonds issued by companies, governments, voluntary organisations

    and/or charities that engage in socially beneficial activities and development

    Funds investable universe and examples

    12

    Social Bond example: Threadneedle Social Bond Fund

    Housing

    Healt & Social Care

    Education

    Financial Inclusion

    Commuity Services

    Environment

    Transport

  • Information provided only for illustrative purposes, the same do not represent an incentive or promotion to the instruments presented. Past

    returns do not guarantee future yields.

    Managed by Fideuram Asset Management with an AuM of USD30 million

    Retail fund allowed for distribution in the EU with weekly liquidity

    Invests in debt and equity instruments targeting a measurable social and

    environmental impact

    Funds strategic allocation

    13

    Multi-strategy example: Fonditalia Ethical Investment

    Equity investments Debt investments

    Cash

    Thematic Bonds &

    Debt Impact Funds

    Listed Impact

    Equities

    Green Bond

  • 14

    Listed Stock example: Low Income Financial Institutions

    Since its inception, Bank Rakyat has commitment to focus on banking services

    in micro, small, and medium enterprises. This commitment is reflected in the

    allocation of loans for the sectors that affect the livelihood of the population and

    other financial services that the Bank offers to the community.

    Market Cap. USD15 bln

    Total Deposits USD41 bln

    Total Assets USD51 bln

    ROE* 32.61%

    P/E 8.30

    P/Book 2.43

    Equity Bank was founded as Equity Building Society in 1984 and was originally a

    provider of mortgage financing for the majority of customers who fell into the low

    income population. Today the bank offers a full range of commercial banking

    services, such as deposits, loans custody and inve