NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Wednesday, November 2, 2011

Private equity investors are famous (or perhaps notorious) for their smart, aggressive and calculating business models. Firms fancy themselves value creators; others have occasionally demonized them as barbarians. Heck, some have even called them honey badgers.

One thing’s for certain: A successful firm prides itself on a healthy IRR. But the Overseas Private Investment Corp. – a self-sustaining agency of the U.S. federal government that has a $15 billion portfolio of debt investments in developing countries – believes that the focus for private investors should include not only capital gains, but the greater good as well.

Last Thursday OPIC announced the provision of about $285 million in debt support for six new “impact investing” funds – funds whose primary purpose is to effect positive social change in developing markets while also making a decent investment return.

The Washington, D.C.-based agency is now preparing to launch another call for funds on Tuesday, Nov. 1, said OPIC’s president, Elizabeth Littlefield. The call will be open for several months and the agency expects eventually to commit to between six and 10 funds, Littlefield said.

Littlefield emphasized that OPIC is actually a profitable federal agency, returning $352 million to the federal government in the 2010 fiscal year. It invests one quarter of its portfolio value in private equity funds that support companies in Africa, Latin America and other developing regions.

“[Impact investors] are increasingly looking to accomplish both values-driven investing and stable competitive financial returns with the same investment,” Littlefield said. “And it can be achieved.”