The Brief | August 13, 2019

The Brief: Racial bias as systemic risk, Adobe Capital’s $30 million close, KKR’s $1 billion raise, loans for Indian agtech, neurodiverse employment opportunities

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Greetings, Agents of Impact!

Featured: ImpactAlpha Original

The better fund managers of color perform, the more racial bias they face. It’s not a pipeline problem. Of the more than $69 trillion in assets managed by mutual funds, hedge funds, real estate and private equity funds, less than 1.3% is managed by firms owned by women or people of color. Investors inside pension funds, endowments, foundations and sovereign funds have long explained the industry’s lack of racial and gender diversity by saying there simply are not enough high-quality fund managers from historically disadvantaged groups. That has led to any number of “emerging managers” initiatives to stock the pipeline. A new study of how investors evaluate funds and allocate capital suggests a more persistent and systemic explanation for the homogeneity: implicit racial bias. The capper in the new data: It is the highest-performing managers of color, not the lowest, that are most harmed by racial bias.

“We put to sleep forever in this paper the idea that it’s only a pipeline problem,” says Illumen Capital’s Daryn Dodson, who co-authored Race influences professional investors’ financial judgment with Stanford SPARQ. The study suggests that by systematically undervaluing racially diverse high performers, asset allocators may be exposing their portfolios to uncompensated risk and leaving returns on the table. Big asset allocators are limiting the available universe of funds and managers by not properly valuing people of color, said Ashby Monk, who heads the Global Projects Center at Stanford and helped design the study. “Which means, you’re limiting your ability to generate high risk-adjusted returns.”

Keep reading, “The better fund managers of color perform, the more racial bias they face,” by Dennis Price on ImpactAlpha.

Dealflow: Follow the Money

Adobe Capital closes $30 million for Mexico’s impact entrepreneurs. The Mexico City-based impact investor has been targeting the “missing middle” capital gap for Mexico’s growing cohort of impact entrepreneurs since 2012. It took nearly two years for Adobe to raise its first $15 million fund. In seven years, the firm has made 11 investments and notched two exits. Now it has closed its second investment fund at $30.3 million. Adobe says all of capital for the second fund was committed by institutional investors. Mexican investors made a bigger showing this time around, the company said, “representing a growing trend of mobilizing local capital towards impact investing.” More.

Rabobank and Caspian launch $2 million debt fund for India’s agtech startups. India’s tech startups are ripe with ideas for improving services, financing and market access for the country’s 135 million smallholder farmers. But agtech startups themselves have trouble getting financing, and especially loans. Dutch banking giant Rabobank and impact investment firm Caspian launched a $2 million, three-year impact debt fund to help early-stage agtech startups secure working capital and other loans. Rabobank’s Arindom Dattatold ImpactAlpha that many startups in the fund’s pipeline have raised equity capital but have never had links to a formal financial institution that can provide debt. He said the small fund will target “smaller and more difficult companies, to really go deep and look for the small gems which have a huge potential but are not seen as ‘bankable’.” The fund, financed by Rabobank India and managed by Caspian, is expected to be fully deployed within three months, is a pilot for a larger lending initiative. Check it out.

KKR tops $1 billion for inaugural impact fund. The private equity firm launched its Global Impact fund last spring. Bloomberg reports that KKR hit its $1 billion goal. The ranks of 10-digit impact funds is growing. After raising $2 billion for The Rise Fund, TPG Growth is in the market with a $3 billion Rise II. Switzerland-based Partners Group is working towards a billion-dollar target. A spokeswoman for KKR declined to comment.

Ultranauts raises $3.5 million to demonstrate neurodiverse employment opportunities. The startup, which provides software and data quality engineering, is on a mission to prove that “neurodiversity,” including autism, can be a competitive advantage in business. SustainVC and The Disability Opportunity Fund led the round.

Pakistan’s i2i launches venture fund, backs Mauqa Online. The eight-year-old, female-led accelerator program rolled out a venture fund to support Pakistani entrepreneurs. Its first investment is a job matching platform for domestic workers.

Agents of Impact: Follow the Talent

Victor Hwang is leaving the Kauffman Foundation, where he has served as vice president of entrepreneurship… The Yield Lab is looking for a principal in Europe… Ford Foundation is recruiting a senior program officer for its mission investments team in New York… REDF seeks an associate director of impact lending in San Francisco… Kiva is looking for a senior risk manager in San Francisco or Portland… CDC Group is hiring an investment manager of energy access, efficiency and infrastructure in London…  Ariel Investments is looking for an environmental, social and governance (ESG) analyst in Chicago… Fair Trade USA is recruiting a manager of research and learning in Oakland… The Global Steering Group for Impact Investing seeks a service manager for its National Advisory Boards in London or Paris… Makerhoods is hiring a director of community in Newark.

– Aug. 13, 2019