The push: Next-gen family members nudging previous generations to tilt family portfolios toward impact. The pull: Large, overlooked markets, ample opportunities to mitigate risks, and a growing set of investable impact products and funds.
The number of wealthy families with allocations for impact investments is increasing across Latin America. That is giving fund managers, high-impact startups and small and medium-sized enterprises a growing source of flexible capital.
To wit: Latin America is one of the fastest growing regions for The ImPact, a global network of high-net worth families that do impact investing. Two dozen Latin American families with combined assets of roughly $2 billion are now part of the group, representing roughly a quarter of the network.
CREO, a global syndicate of impact-focused wealthy families, is also recruiting members in Latin America. The regional effort is led by Christo Artusio and Juan Luis Palma, who helped Capria build its presence in Latin America.
Latimpacto, a homegrown network of impact investors, counts dozens of family offices, multi-family offices and family foundations among its more than 200 members.
“Long-term, I can have market returns with lower risk,” says Pablo Alonso of Eurocapital, a multifamily office with clients in Chili, Argentina, Peru and Uruguay, as well as Spain. “And I can help with climate change or education or reduce poverty.”
Alonso will join Fernanda Camargo of São Paulo-based Wright Capital and other family offices, wealth managers and advisors at Latimpacto’s Impact Minds conference next month in Oaxaca, Mexico. ImpactAlpha is a media sponsor.
From experiments to experience
For some families, experiments in impact investing that began a decade ago are now embedded in portfolio strategies. Family capital for impact increasingly flows through a variety of structures, including companies, family offices, foundations, family funds and independent funds.
“Families in the region have gone from making ‘experimental’ investments with these models to building robust and intentional impact investment portfolios,” The ImPact’s Linda Rincón told UBS and Latimpacto for a report that profiles the impact strategies of Latin American families.
Nine of 10 families profiled “stated that they are working on impact investment models within their portfolios,” according to the authors.
In Chile, the Mustakis family has dedicated 15% of the foundation’s endowment to impact investments. The Russo family in Brazil created Meraki Impact as an impact-focused family office. In Mexico, the Sánchez-Navarro family launched CO_ Capital, a debt fund that can take on outside capital, in addition to the family’s.
Maria Hollan, a next-gen impact investor at Timke Ventures, a Mexico-based family office, helped her family lift impact out of the philanthropy bucket with two direct impact investments. “Then I realized you can have impact as a complete portfolio,” she told ImpactAlpha (watch her video interview).
A separate survey from The ImPact of 65 Latin American families with total assets of more than $1.2 billion found that 80% have at least small allocations for impact investments in their portfolios.
Funds of funds
In the young but maturing market for impact investments in Latin America, intentions too often fall short of reality.
Alonso says at least seven of his 32 clients now invest in private impact funds, with ticket sizes between a half-million and $1 million, such as Bogota-based EWA Capital. They are on the hunt for nature-based and regenerative opportunities, like Regenera Ventures in Mexico.
But with fund sizes of local fund managers often too small, and track records still nascent, Alonso says, many families continue to move much of that money out of the region, to funds including TPG’s Rise Fund and Blue Earth Capital, an independent impact fund incubated by Partners Group.
Funds of funds provide an attractive alternative. Alonso has found success with Santiago, Chile-based Fondo de Inversión Social, or FIS, and Sonen Capital’s Latin America Impact Fund, a fund of funds co-managed with Mexican private-equity manager Fondo de Fondos (for background see, “Grupo Bimbo anchors an impact fund of funds in Latin America”).
Infinite opportunities
Wright Capital’s Camargo manages the wealth of over 40 Brazilian families. In the country’s more mature capital market, she has stood up three in-house funds of funds of roughly $30 to $40 million each. By pooling capital and due diligence, the structure cuts the transaction costs of investing in smaller funds.
Camargo’s clients have invested with Brazilian managers, including Vox Capital, MOV Investimentos, Positive Ventures, Rise Ventures, GEF Climate Solutions, Yunus Negocios Sociais and Estímulo.
Brazilian families are “motivated by the impact,” says Camargo, who started Wright a decade ago with a requirement that families invest at least 1% of their assets in impact. Today, such allocations are closer to 4%; a handful of families have even begun to deploy impact-first and catalytic capital.
Her clients see “huge” opportunities for risk-adjusted market rates of return in private credit and “missing middle” strategies.
Wright’s next fund of funds will focus on nature-based solutions, regenerative agriculture and climate tech. “We have an infinite amount of opportunities in the bioeconomy,” Camargo told ImpactAlpha.
