The Risk and Return of Impact Investing Funds

(with Jessica Jeffers and Kelly Posenau), November 2021

We provide the first analysis of the risk exposure and consequent risk-adjusted performance of impactinvesting funds, private market funds with dual financial and social goals. We introduce a new dataset of impact fund cash flows constructed from financial statements. When accounting for market risk exposure, impact funds underperform the market, though not more so that comparable private market strategies. We exploit known distortions in measures of VC performance to characterize the risk profile of impact funds. Impact funds have substantially lower market beta than VC funds, contradicting the idea of sustainability as a “luxury good”. We find that impact fund cash flows do not exhibit positive correlation with a public market sustainability factor, consistent with the idea that private and public market sustainability strategies capture distinct exposures.

Short-Run Underreaction with Delayed Overreaction in Corporate Earnings Growth

December 2021