UBS Wealth Management Americas has partnered with impact investment venture capital (VC) firm Rethink Impact to help raise $110 million for its gender-lens overlay impact fund.
The bank announced the formation of partnership on Wednesday to coincide with International Women’s Day.
The fund invests in tech companies that have a positive impact in the sectors of healthcare, the environment education and economic empowerment – with the added kicker of only including companies with at least one woman in a senior management role at the company.
The VC industry as a whole has struggled to embrace diversity. For example, fewer than 6% of people making investment decisions at VC firms are women. And the distribution of VC dollars to companies with female CEOs is just 3%.
Jenny Abramson, former CEO of a tech company, saw the disparity first hand and set up Rethink Impact in 2015 with Seavest Investment Group and then added Heidi Patel, as a partner, to invest in early stage companies that have a positive social impact with a gender-lens overlay.
Abramson says it makes sense to include a gender-lens overlay, given the amount of data that point to diversity having a positive impact on company returns. On average, firms with 30% female leadership see net revenues 15% higher than firms with no female leaders.
That said, Abramson points out there is still a large disconnect between the data and public interest in investing in firms based on their diversity. She is hopeful that the tipping point is nearing.
“In the seed capital space – which feeds into the growth VC pipeline – we are seeing more accelerators focusing on women or funding women, and that’s likely to increase,” she says.
With forecasts of women controlling two-thirds of the world’s wealth by 2030, that appetite for investing in women, or diverse companies, is likely to increase.
“We think we will see more products with gender-lens overlays, and more companies that meet the requirements for investment, which is one reason we wanted to get over $100 million – to have dry powder to support entrepreneurs with follow-on capital,” says Abramson.
The fund closed on more than $110 million with capital commitments, with some already allocated to eight companies – expected to increase to 20 to 25 companies over the life of the fund.
It is a positive step forward for UBS Wealth Management Americas that, up to now, has largely seen the group’s international business take a more active role in impact investing.
However, there is a firm-wide push around impact investing. At the World Economic Forum’s annual meeting this year in Davos, UBS committed to direct at least $5 billion of client assets into new sustainable development goal-related impact investments over the next five years.
|John Amore, UBS|
John Amore, managing director of UBS Wealth Management advice, says the firm spoke with 30 impact investment firms in the US looking for the right opportunities for its clients.
“We were looking for a partner above all with a strong track record in performance and investment capability,” he says. “That, and the authenticity of Rethink Impact’s commitment to social impact and its narrative around gender provided a great opportunity for our clients.”
Amore says the fund was particularly popular with its female executive and entrepreneur clients, and some of UBS Wealth Management Americas’ female financial advisers felt inspired to invest.
Rethink Impact’s Abramson says she hopes opportunities to create similar funds will arise internationally to help bring the disequilibrium within the VC industry into balance.