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

Thursday, December 4, 2014

Ron Cordes used to get patronizing pats on the head from the traditional financial advisors he once worked with. Now, many of his former colleagues are asking him to help them get smarter about impact investing.

“They used to say, ‘That’s great, you’re solving the big problems. We’re just slogging away in the traditional investment world,’” says Cordes, who built AssetMark Investment Services to about $9 billion in assets, sold it to Genworth Financial Inc. in 2006, and last year was part of an investment group that re-acquired the company. “Now I’m getting a lot more folks from my prior world saying, ‘How can I get involved in this?’”

Cordes and his wife, Marty, set up the Cordes Foundation with some of the proceeds of the sale of AssetMark. Frustrated by the traditional foundation model in which programmatic impact is limited to the small grants budget, the foundation’s board agreed to invest some endowment assets in ventures and funds that generated social and environmental benefits along with attractive returns. By the time the global financial crisis hit in 2008, the foundation had 20 percent of its portfolio in microfinance and other impact-driven debt and equity vehicles.

Mainstream investments in global banks with heavy mortgage investments took a big hit. In contrast, Cordes says, “Unsecured loans to small borrowers in countries I can’t name or find on the map paid off just fine, 100 percent plus accrued interest. That was the wake-up call for me to say, ‘Here’s a totally uncorrelated asset class that in the worst financial crisis in my lifetime was the only thing I had invested in that was immune to the crisis.’”