Aggregating Impact: A Funder's Guide to Mission Investment Intermediaries

by Mark R. Kramer; Sarah Cooch

Nov 1, 2007

This report provides a guide to mission investment intermediaries, organizations that collect capital from multiple sources and reinvest it in people and enterprises, whether nonprofit or for-profit, that deliver both social impact and financial returns. A growing number of foundations and other funders are beginning to use such intermediaries versus making mission investments directly. This is due to a number of advantages that intermediaries can provide, such as ease of investment, reduced risk, lower transaction costs, specialized expertise, performance reporting, and an expanded deal flow. Yet research disclosed that many funders are unaware of the wide range of mission investment intermediaries that are available and of the advantages they can offer. The authors provide an overview of mission investment intermediaries and how foundations use them, the benefits and challenges of investing in intermediaries, and an analysis of available intermediaries that address economic development, housing and the environment.

  • Approximately one-third of the U.S. foundations active in mission investing have collectively invested more than $521 million in intermediaries, and the percentage of mission investment dollars going to intermediaries has been increasing. From 2001 to 2005, one-quarter of all mission investment dollars went to intermediaries.
  • The use of intermediaries offers a number of advantages, including ease of investment, reduced risk, lower transaction costs, specialized expertise, consolidated performance reporting, and a broad pipeline of investments.
  • Six types of intermediaries can be used: community development banks and credit unions, loan funds, venture capital and private equity funds, fixed income funds, real estate funds, and public equity mutual funds.
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