The Risk and Return of Impact Investing Funds

(with Jessica Jeffers and Kelly Posenau), May 2022

We provide the first analysis of the risk exposure and risk-adjusted performance of impact investing funds, private market funds with dual financial and social goals. We introduce a dataset of impact fund cash flows and exploit distortions in VC performance measures to characterize risk profiles. Impact funds have a lower market β than comparable private market strategies. Accounting for β, impact funds underperform the public market, though not more so than comparable strategies. Adding a public sustainability factor to our pricing model helps explain impact returns, though the correlation of fund cash flows with this factor is not necessarily positive.

Short-Run Underreaction with Delayed Overreaction in Corporate Earnings Growth

December 2021