ImpactAlpha, May 16 – Recent economic volatility has pushed the share of global assets managed by women and people of color below an already low 3%.
“People revert to what they are familiar with, rather than what they’ve been trained to do as investment professionals, which is finding value,” Illumen Capital’s Daryn Dodson told ImpactAlpha. “Our skills now are even more important.”
Those skills: investing in fund managers and providing them with 10 years of training to identify and flush out bias in their and their portfolio companies’ investment and human resource processes.
Doing so, the firm argues, uncovers and delivers untapped financial and economic value.
Illumen has raised $168 million to double-down on the thesis with a second fund.
“Some of the largest and most explosive trends in the United States, and indeed the rest of the world, are around the buying power and productization across multiple languages” and demographics, said Dodson. “There’s massive pent up latent value within markets that can be unlocked.”
The Ford and the W.K. Kellogg foundations, lead investors in Illumen’s first fund, also anchored its second.
Illumen closed its first fund in 2020. It has invested in more than 10 managers and 16 of their funds, which have a stake in more than 350 companies. Just over a quarter of managers are women-led. More than half are led by people of color.
One impact of Illumen’s training is showing up in fund managers’ term sheets, says Dodson. “We’ve seen some of the lessons get codified in the term sheets of underlying portfolio companies in order to [advance] more equitable hiring.”
Generative AI and its potential to accelerate or reduce systemic bias is becoming a focus across Illumen’s growing portfolio.
“I think they’re better prepared than many in the market to address these issues with their portfolio companies,” Dodson said. “They’ve gotten a first look at bias and have already been building their muscles toward understanding its implications.”
Illumen’s second fund raised $20 million more than its target and is nearly double the size of its first fund. More than 100 investors joined in.
“There are 100-plus investors learning alongside us and applying [these strategies] to their respective portfolios,” said Dodson.
Illumen’s investor base includes many mainstream investors who are “interested in gaining insights on the economic value-creation part,” he added. “That’s really exciting for us.”