We conclude with a second story on the first “WIB” today but the first is a real must read – a large investment manager discusses the dynamics of SIBs and how he can get comfortable with them within a portfolio. Why is this dynamite?
Well for one thing it opens the SIB world to proper bond funds on a broader basis. Secondly, if SIBs can maintain decent returns they may be well placed to take up a form of slack in the near future when QE dies and the corporate / junk bond market suffers a likely bubble top which has been brewing for some years. Very interesting..
Social Impact Bonds: A Look Through The Institutional Investor Lense
Jonathan Shapiro – Australian Financial Review
As a portfolio manager in the 1990s at National Mutual Gary Brader grasped the enormous potential of securitisation to lower household borrowing costs by pooling together mortgages. That experience is why Brader, who is now chief investment officer at global insurer QBE, is such an active proponent of social impact bonds.
The global insurer has committed to investing up to $100 million in social impact bonds, where payments are tied to social outcomes – with the capital to be allocated over three years in bonds issued around the world.
With a large investment book playing a crucial role in delivering returns to shareholders, Brader cannot afford to allocate funds on a purely philanthropic basis. But he’s still lured towards the opportunity that presents itself from social impact bonds. “A cold-blooded heartless hedge fund could still find these investments interesting,” he says.
“We have a duty to seek strong risk-adjusted returns and these instruments allow even the most hard-nosed investors to become comfortable.” QBE is a rare institutional investor in a space that is largely the domain of high-net-worth philanthropists and their foundations. But Brader says for social impact investing to achieve its true potential it needs to evolve into an institutional asset class.
A New Bond Aims To Save Women’s Lives In Developing Nations
Anne Field – Forbes
In many developing nations, women often risk their lives every time they cook. The reason: They use solid fuels like wood and coal that, when burned in inefficient cook stoves or open fires, fill their homes with toxic smoke. About 4.3 million people a year die from pneumonia, chronic pulmonary disease and other illnesses resulting from these fumes, according to the World Health Organization. That also includes children who hang out by the stove as their mother cooks.
That’s why Singapore-based Impact Investment Exchange Asia (IIX) recently announced the Women’s Impact Bond (WIB) at the Clinton Global Initiative conference in New York.
The WSB will pool $10 million into a bond aimed at supporting social enterprises and microfinance organizations trying to introduce clean cook stoves and that will be listed on the Impact Exchange, a social stock exchange.