Trilinc: Impact Opportunities for Retail Investors

Gloria Nelund is bringing impact investing to Main Street. Her TriLinc Global Impact Fund, with individual investments as low as $2,000, is among only a handful of financial vehicles available to “retail” investors,” the approximately 50 million U.S. households who don’t qualify as high net-worth, or “accredited,” investors.

That gives a broader group of individual investors a chance to invest in one of the best strategies for job-creation and economic inclusion in the developing world: trade financing and term loans for small and medium enterprises or “SME’s’ in development jargon. According to its public filings, Trilinc has recently extended loans to Corporacion Prodesa, a Peruvian diaper manufacturer; Forestal Rio Calle Calle, a Chilean sustainable timber exporter; and PT Indah Global Semesta, a retailer in Indonesia selling appliances on a payment plans to low-income consumers.

The fund targets gross returns in the low double-digits, along with current income and capital preservation. Her research found investors could accept a short lock-up period, as long as the longer term risk to their capital is low.

I’m going to prove you can generate competitive financial returns and generate impact, but you have to change how things are done.Gloria Nelund, chief executive, TriLinc Global

Trilinc looks for established social enterprises in stable emerging markets that are ripe for growth capital, and represent a lower risk than early-stage companies, which have a high failure rate. In-country, TriLinc relies on local sub-managers who have pipeline and processes as a result of their experience working with development finance institutions to make similar loans.

Borrowers, who generally pay interest of between 10 percent and 13 percent, agree to abide by TriLinc’s impact-tracking methods. Nelund reports to investors impacts such as job creation, wage increases and employee ownership, as well as specific criteria selected by portfolio companies, such as access to clean water.

Nelund “retired” in 2005 after 30 years on Wall Street, most recently as head of DeutscheBank’s U.S. private wealth management. She put her experience to work exploring the challenges of scaling private capital to SMEs in developing economies. Small-scale impact funds were struggling to attract institutional investors without track records and replicable processes. Reaching high-net worth individuals was just as tough.

Last year, Nelund filed with the SEC to raise $1.5 billion for the Trilinc’s Global Impact Fund. Big brokerages require such capacity to put new investment products in front of their brokers. Cracking those banks is tough, but Trilinc is building a network of financial advisors and family offices and has raised $21 million so far.

“I’m going to prove you can generate competitive financial returns and generate impact, but you have to change how things are done,” Nelund says.

Trilinc’s results are promising, if inconclusive. The public filings show Trilinc Global has invested nearly $18 million in seven businesses in Latin America and Indonesia, for an average loan size of $1.3 million with a weighted average yield of 13.2 percent. As an example of its social impact, Trilinc says revenues for the Chilean timber exporter, certified by the Forest Stewardship Council, have tripled, creating 500 jobs. The company, Forestal Rio Calle Calle, sells forest residue to energy-efficient thermal power plants.

Expect more retail investment vehicles for impact investors. The Calvert Foundation’s Community Investment Notes have raised about $240 million, offering up to 3 percent returns on terms up to 20 years. Numerous crowd-funding sites are readying themselves to offer direct investments for non-accredited investors once the SEC issues new rules.

Nelund says individual investors are looking for impact. “We get a lot of calls asking ‘How can we get on your product?’” says Nelund. “I tell them, ‘Go ask your financial advisor.”

IMPACTS
Financial

Trilinc’s has a loan portfolio of more than $20 million to small- and medium-sized enterprises in Latin America and Indonesia.

Social

A borrower in Chile that exports sustainable timber has tripled revenues, creating 500 local jobs.

One of a series of impact profiles produced in conjunction with the Case Foundation’s new publication, “A Short Guide to Impact Investing.”

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