Myths in Social Impact Investing (Part 3)

Part 3 of a 3-Part Series on Common Myths of Social Impact Investing

An Op-Ed by our Founder and CEO, Andrew Vo

❌ Myth #3 - Social Impact Investing is a Theme

The Final Part of our 3-Part Series on "Myths in Social Impact Investing." You can find Part 1 here and Part 2 here, which we recommend you read before continuing on.

Traditional investment managers like BlackRock (with an entire business division now dedicated to "BlackRock Sustainability") - would certainly like you to think so.

Need a little “Feel Good” position in your portfolios?

Then buy an ETF or private equity fund that makes “social impact” and will “make the world a better place” - a common strategy used by Private Equity and Venture Capital fund managers during their pitch to investors / LPs like pensions, endowments and foundations.

The largest pension in the U.S. (CalPERS or California's government employees pension plan) brought up this sales pitch during the early 2000s and you can check out the poor results here.

The bad results being poor investment returns - after paying Private Equity fund managers and Venture Capitalists billions in Management Fees - that are worse than simply allocating to an S&P 500 ETF at almost no cost (<5 basis points).

So what is Social Impact Investing?

Social Impact Investing is really Diversity Investing, defined below.

Within the context of Venture Capital, Diversity Investing is the value-added benefits of combining complementary Founder Backgrounds and Life Perspectives to build exceptional early-stage businesses.

So the next time you hear any of these myths about Social Impact Investing from your investment colleagues, please tell them why they've misunderstood.



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