Impact funds strive for both good return and high impact. But how do you know a fund is doing a good job?
Social Performance Based Success Fees are a twist on carried interest. Typically, once a fund achieves its pre-determined hurdle rate, the fund manager receives a portion of the profits over that goal, usually around 20%. This is called carried interest.
But at Vox Capital, “If we do not reach the minimum expected social impact level, our team is entitled to only half of the carry. At the same time, if the financial return is below its target, we are not entitled to any success fee, regardless of our social impact results.” Vox measure Impact using Global Impact Investing Ratings System (GIIRS)
Insitor Management, is also held accountable. But instead of measuring impact over the entire portfolio, they have different thresholds for each investment.
These are some of the findings of a report summarizing 30+ interviews on measuring impact, from big impact investors like Calvert Foundation and Acumen Fund, to small organizations with less than 15 employees.
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