Family Wealth Report


Family Wealth Report, By Eliane Chavagnon

October 29, 2013



Sonen Capital has partnered with the KL Felicitas Foundation in producing a report entitled Evolution of an Impact Portfolio: From Implementation to Results, which details the financial performance of the foundation’s investment portfolio.


The report finds that impact investments can compete with — and at times outperform — traditional asset class strategies while pursuing “meaningful and measurable social and environmental results.” (Sonen describes impact investing as “investing with the intent to generate both financial returns and purposeful, measurable, positive social or environmental impact.”)


The firm considers 38 of the underlying investments in KLF’s impact portfolio, which accounted for $37.2 billion of assets under management. It concludes that the “impact sector likely holds significantly larger absorptive capacity.”


The executive summary begins by explaining how the KL Foundation in 2004 launched an initiative that would eventually allocate all the foundation’s capital to so-called impact investments.


The foundation’s “experiment,” the report outlines, has helped reshape the investment landscape; between 2006 and 2012 the foundation moved from 2 per cent of assets allocated to impact to over 85 per cent, while also achieving index-competitive, risk-adjusted returns.

Sonen said the report reveals several key findings, touching on the areas of “investment size and options,” “impact alpha” and “diversification.”

The former section argues that a risk-aware portfolio approach to impact investing can be implemented across a range of portfolio sizes, as new options in the impact marketplace allow investors to pursue numerous financial and impact goals through public and private strategies.


Impact alpha looks at how positive impacts generated by an “impact portfolio” exist in several forms. An impact investment strategy may also yield portfolio advantages, including reducing overall portfolio volatility or seizing opportunities to capture alpha through market inefficiencies, and by capitalizing on long-term social and environmental trends.


The report then looks at the role of diversification and how the firm’s data suggest that impact investments can address needs across a range of impact opportunities and financial goals. Impact investments could also offer investors less correlated exposures which improve social and environmental conditions at local, regional and global levels, it says.

“Specifically, this report details the performance of the Return-Based Impact Portfolio created by KLF, and more specifically those investments with so-called ‘reportable’ performance (i.e., performance that can be marked to market on a regular basis),” Sonen said.

The report also shows the performance of each reportable return-based impact asset class, compared to traditional benchmarks. The firm believes the results demonstrate that impact investments can compete with traditional investment strategies.


See the full article on Family Wealth Report.

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