Family office impact investors play a unique role in scaling the market because they offer the two ingredients necessary for growth: capital and flexibility.
With the number of family offices increasing, they represent a potential source of funding. In July 2019, Campden Wealth Research estimated there were 7,300 offices worldwide—a 38% jump from just two years earlier—with nearly $6 trillion in assets under management. The 2019 UBS-Campden Global Family Office Report found that a quarter of family offices now participate in impact investing.
Just as importantly, families have the flexibility to make innovative investment decisions. “Family offices possess the vehicles to invest across the returns continuum—most other institutional investors do not,” Liesel Pritzker Simmons, co-founder of Blue Haven Initiative, wrote in the Economist. “They also tend to have more lean and nimble decision-making structures, which is helpful when evaluating some of the creative financing structures that are being developed.”
Blue Haven Invests across the Returns Spectrum
At 35, Pritzker Simmons is something of a grand dame among wealthy millennial impact investors. A Hyatt Hotel heiress, she established Blue Haven Initiative as a single-family office with her husband Ian Simmons in 2012. From the start, the Simmonses aimed to incorporate social and environmental factors into every investment decision they made and to seek market-rate returns. The first part of that equation still holds true: their strategy remains fully invested in impact investments. However, their views on financial returns have evolved, and they now have a small number of concessionary investments.
Through its market-rate portfolio, Blue Haven invests across asset classes, including public equity funds, fixed income, private equity funds, alternative investments, real assets, and early-stage venture capital (VC). The VC portfolio specializes in funding tech-enabled businesses in financial services, renewable energy, and logistics in sub-Saharan Africa and funding startups such as online payments company Paystack, digital food distribution startup Twiga, and M-KOPA Solar.
On the philanthropic side, Blue Haven supports ideas and interventions that markets systemically undervalue by providing both grants and “catalytic capital,” the latter through a donor-advised fund. “Even though these investments may have a return expectation, we find that keeping these investments under the ‘philanthropic’ heading helps us keep risk, innovation, and impact at the forefront of our decision-making,” Pritzker Simmons wrote.
The Cordes Foundation Funds Economic Empowerment
The Cordes family is another impact pioneer and what might be considered an “influencer” in the realm of family office impact investing. Ron Cordes established the Cordes Foundation in Bethesda, Maryland, in 2006 with funds from the $230 million sale of his investment management firm. Early on, he and his wife, Marty, devoted about 20% of the foundation’s resources to impact investments, largely to companies supporting economic empowerment. They later transitioned the organization’s entire endowment to impact investing.
The foundation funds mission-aligned companies across multiple asset classes, through both direct investments and funds that analyze financial, environmental, social, and governance factors. Fund managers include Breckenridge Capital Advisors for public debt and Pax World Investments and Trillium Asset Management for public equity.
The family’s focus on poverty alleviation and gender equality is guided by Marty Cordes and the couple’s 29-year-old daughter Steph Stephenson, who now serves as the foundation’s co-chair. They have invested in private equity funds focused on financial inclusion, such as Women’s World Banking and MicroVest, and made direct private equity investments in companies such as Soko, a website that sources jewelry from female artisans in developing countries.
“There are real investing opportunities with impact,” Ron Cordes told Reuters. “It’s not about disguised philanthropy.”
The Scodro Family Joins Forces with Other Family Offices
Fernando Scodro, a 31-year-old Brazilian entrepreneur, had to persuade his parents to adopt impact investing as the primary strategy for their family office portfolio. Scodro’s family made their fortune when they sold their baking and confectionery company, Grupo Mabel, to PepsiCo for $520 million. In 2013, he left his finance job in Hong Kong to return home and manage the family money.
To win his parents over to impact investing, Scodro gathered materials from a course he had taken and translated them into Portuguese so he could teach them. “My family [members] speak English, but it is not their native language,” he told the Financial Times. “I figured that for me to get buy-in from my parents, I had to speak to them in a language they understood.”
Scodro has since joined forces with two other family offices to advance their impact investment goals. The families formed WEcubed Partners, a multifamily office that focuses its investment efforts on venture projects tackling neurological disorders, infectious diseases, and animal-free solutions.
Despite these three notable examples, family offices that make impact investing their primary strategy are still a minority. Of all family office impact investors, more than 70% allocate under 10% of their assets to the approach, according to the UBS report. However, allocations are expected to increase. Five years from now, more than a third expect to boost their impact allocation to total between 10% and 24% of their portfolios, while just under a third plan to allocate 25% or more.
Feature image: Liesel Pritzker Simmons speaking at Collision from Home (photo by Collision from Home)