Integrating Impact Funds into Mainstream Portfolios

Donough Kilmurray, Lionel Melin, Benoît Mercereau

2021 | Practitioner | Funds, Impact Investing, Portfolio Construction

Interest in impact investing is growing, but investors typically allocate to impact funds and traditional assets independently from one another. We develop an optimizer that brings both types of assets together. Doing so allows investors to maximize impact for a certain level of risk-adjusted returns. For example, we find that investors can allocate 18% more to impact funds on average while keeping risk-adjusted returns constant.