Analyzing the Financial Performance of Impact Investing Funds in the Private Equity Landscape: A Comparative Analysis

Abstract

This study explores the financial performance of impact investing funds compared to non-impact private equity funds. By compiling a global dataset, we aim to shed light on the profitability of impact investing in the private equity market. We find that irrespective of the measure of performance we use, impact funds generate lower returns to investors than non-impact funds. Although, given the small number of impact funds in the sample, the difference is not consistently significant. In addition, vintage year emerges as a critical factor, indicating that long-lived impact funds tend to outperform their short-lived counterparts. Also, impact funds with a higher fund number underperform, hinting that earlier funds capture the most returns. While our results suggest a potential relationship, the evidence is insufficient to draw definitive conclusions. However, we have sufficient evidence to conclude on some aspects of performance for the private equity landscape. Specifically, venture capital funds underperform buyout funds in our sample; larger fund sizes correlate with decreased financial performance, and North American funds underperform. These findings provide nuanced insights into the dynamics of private equity and impact investing, highlighting the need for further research to understand these complex relationships fully.