Rounding out portfolios with direct-impact investments

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Advisors can help clients invest in private equity and debt investments that can more directly affect communities in need and make money at the same time, said experts speaking last week at the SRI Conference in San Diego, led by First Affirmative Financial Network.

“With direct-impact investments, advisors can differentiate their practices not only by their service but also by the types of assets they make available to clients, much broader than those of the average robo-advisor,” said Blaine McLaughlin, chief operating officer at VIA Folio.

The McLean, Virginia, company helps firms raise equity capital through its online brokerage and custodial platform. Advisors can access this platform on behalf of clients who want to invest in these firms.

Enterprise Community Partners operates the Enterprise Community Loan Fund, a community development financial institution that places capital into real estate assets, such as affordable housing, community centers and for entrepreneurs who aren’t able to access capital from traditional places, said Rachel Reilly Carroll, associate director of impact investing in Columbia, Maryland.

“[Community development financial institutions funds] are now leveraging their strong track records to create products that let others do impact investing,” such as the Enterprise Community Impact Note, she said.

The fixed-income note finances community projects and pays rates ranging from 85 basis points for a one-year term, to 3.5% for 10 years.

“We have a staff of 600 folks on the ground, working with communities and local governments to tailor solutions to solve local problems,” she said. “Then our measurement team works with the local community stakeholders to see if the impact investments were effective, which helps us create best practices so we can replicate the models.”

ImpactUs of Washington last year launched ImpactUs Marketplace, an online platform for direct-impact fixed-income and equity private placement products, said Liz Sessler, vice president of client engagement.

“We can help you find investments” for projects by organizations ranging from “very early stage all the way up to those with extended 35-plus-year track records with guarantees behind them,” she said.

“We are finding that people run the map” on their investment preferences, Sessler said.

“Many want something very local in their neighborhoods. They want the opportunity to do on-site visits, meet with the people who are impacted,” Sessler said.

“On the flip side, we can help you find a truly diversified fund,” she said.

FactRight in Eden Prairie Minnesota, provides advisors with due diligence support on direct impact and other types of alternative investments, said Scott Smith, president and chief executive.

“Alternative investments are continuing to grow, and there are tools to help make it easier to help your clients to figure out the roadblocks and how to tackle them,” he said.

This story is part of a 30-30 series on navigating the growing world of choices for client portfolios.

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