gloria nelund

Connecting Impact Investing to Significant Capital

PERSPECTIVE

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Connecting Capital to Impact Investments

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1) Understand the landscape and then choose a Market

2) Understand how and why products are “bought” in the unique channel you are pursuing, including the trends that will influence FUTURE behavior

3) Position for success and “sell”

The Capital Landscape (for scale)

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Three Large Potential Markets for Impact Investing Products

Sources: Merrill Lynch Cap Gemini 2010 World Wealth Report, McKinsey & Co The Asset Management Industry 2010

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1) Understand the landscape and choose a Market




Institutional - Globally

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Large• Endowments &

Foundations• Pension Funds• Fund of Funds• Family Offices

Intermediary“Gatekeeper”

Consultants

Board

Key Issues for Access:

• Style Box Fit• 3 – 5 year Track Record• Team Longevity and Stability• Disciplined Performance Metrics• 24 – 36 mo Lead Time to Close (LTC)• Typically last in to new ideas

Small• Endowments &

Foundations• Pension Funds• Fund of Funds• Family Offices

Consultants

Consultants and/or IC

BoardCIO or IC

CIO or IC

• Relationship to get meeting• Asset Allocation Fit• Track Record• 24 – 36 mo LTC

CIO

High Net Worth – U.S. Perspective

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Delegators• Private Banks• Trust Companies• RIAs• Managed Account

Platforms


Prod Cttee +/or IC

1st - Prod Cttee 2nd Advisor


• Fiduciary Responsibility• Proprietary vs. true Open Arch.• Asset Allocation Fit• Capacity of non-registered products

for relatively small allocation• 12 -18 mo LTC• Difficult to influence as a group

Advice Seekers• Wealth Advisory

Firms• Brokerage Firms• On-line Platforms

IC

Prod Cttee

• Asset Allocation Fit• Product Overload• Capacity of non-registered

products for relatively small allocation

• Multi-Step Sale 18 – 24 mo LTC

Prod Cttee

Retail – U.S. Perspective

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1st - Prod Cttee +/or IC

2nd - Advisor

1st - Prod Cttee 2nd Advisor


All Other AUM• Boutique Firms

(RIAs & Banks)• Brokerage Firms• Financial Planners

• On-line Platforms Prod Cttee

• Registered Product• Asset Allocation Fit• Product Overload• Capacity• Institutional Sale at Platform Level• Wholesaler Sale at Financial

Advisor Level• Multi-Step Sale 18 – 24 mo LTC

IRA Rollovers• Boutique

Firms(RIAs & Banks)• Brokerage Firms

401ks• Registered Product• Daily Liquidity• Complex, Multi-part Sale

1st – Platform2nd - Plan Sponsor

• Registered Product• Capacity• Institutional Sale

Why it Matters – Example (U.S. Individual Investors)

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Total AUM $ 29.776 T

Family Offices• Single Family (1,000)

• Multi-Family (4,000)

Private Banks• Top 20• Rest (950)

Fee-Only RIAs• Top 100• Rest (4,000)

Brokerage Firms• Top 4• Rest (5,050)

Self-Managed

$300 bil$750 bil

AUM % TotalProp.Only?

OutsideProd?

$7.3 T$4.1 T

$256 bil$1.44 T

$4.75 T$9.9 T

$980 bil

1.01%2.52%

24.52%13.77%

.86%4.84%

15.95%33.25%

3.29%

X

X

Unique

YES

YESYES

YES

Why it Matters – U.S. Example

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$ 12.05 T






Self-Managed

$300 bil$750 bil


OutsideProd?

$7.3 T$4.1 T

$256 bil$1.44 T

$4.75 T$9.9 T

$980 bil

1.01%2.52%

24.52%13.77%

.86%4.84%

15.95%33.25%

3.29%

X

X

Unique

YES

YESYES

YES

40.47%

Why it Matters – U.S. Example

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$ 9.9 T






Self-Managed

$300 bil$750 bil


OutsideProd?

$7.3 T$4.1 T

$256 bil$1.44 T

$4.75 T$9.9 T

$980 bil

1.01%2.52%

24.52%13.77%

.86%4.84%

15.95%33.25%

3.29%

X

X

Unique

YES

YESYES

YES

33.25%

Key Trends

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Key Trends

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• Strong growth for income-generation, risk-management, and outcome-oriented products.

• The impending retirement of the 76 million baby boomers will result in 2/3 of all investable assets being controlled by households in the income/protection/preservation mode.

• As much as 25 – 30% of leading firms’ earnings will be derived from products they aren’t even offering today.

• The increasing institutionalization of the retail sale will require asset managers to take a new approach to third-party distribution and client service.

• Home-office gatekeepers will wield far greater influence.

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1) Understand the landscape and choose a Market




Positioning - The Laws of Perception

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• There is no objective reality• Perception is reality• All that is real is the perception in the mind of the buyer

Law # 1

Law # 2

• Minds are very difficult to change• A perception is perceived as “right”• People are seldom, if ever “wrong”

Positioning: The Battle for Your Mind, Al Ries, Jack Trout

The Power of Perception Demonstrated

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What is the Most Popular Soup Brand in the U.K.?

The Power of Perception

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What is the Most Popular Soup in the U.K.?


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Americans eat 10 Billion bowls of soup every day yet Heinz soup failed in the U.S.

Why?


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Impact Investing Positioning Challenge

Investment? Philanthropy?

ImpactInvestments

?

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Current Impact Investing Product Landscape

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Low

High

Exp

ecte

d R

etu

rn o

n In

vest

men

t

HighExpected Social and/or Environmental Impact

“Standard”Investments

?

PHILANTHROPY?

NOT BINARY; however, as an industry we need to be clear in our positioning

Impact Investing Positioning Challenge

Investment? Philanthropy?

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Impact Investments Impact Philanthropy

Positioning Ourselves For Success

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INVESTMENT PRODUCTS ARE

SOLD NOT BOUGHT

Asset Classes Today

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StocksBondsAlternativesCash

Hedge FundsPrivate EquityReal AssetsDomestic EquityForeign EquityFixed IncomeCash

RETAIL INVESTOR ALLOCATION

YALE ENDOWMENT ALLOCATION

ALTERNATIVES = 15%

ALTERNATIVES = 78.8%

The Tipping Point by Malcolm Gladwell

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1.The Law of the Few

2.The Stickiness Factor

3.The Power of Context

Three Rules of Epidemics

What Will It Take?

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• On-going Education

• Continued Building of Infrastructure

• A Few Products at Scale

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We have both

the OPPORTUNITY

and

the IMPERITIVE

to bring about compelling change!

Behavioral Change Takes Time

gloria nelund

Economy & Finance