In the first of its kind in Australia, superannuation fund Christian Super has set up Brightlight as a service to asset owners who want to access the impact investment marketplace.
For close to a decade, Christian Super has developed strong in-house expertise in the running of its impact investment portfolio. Having completed 17 deals in seven jurisdictions amounting to more than $140 million, Christian Super has used nine different investment structures, with more than 150 underlying portfolio companies. The portfolio accounts for up to 10 per cent of its asset allocation.
Through Brightlight, it aims to create a pathway for institutional investors to enter the impact investing space.
“There’s lot of demand out there for our impact investments, advice and products, and for faith-based values aligned to our investment products, and therefore we think there is a business to be built there,” says Tim Macready, Chief Investment Officer of Christian Super, and the managing director of Brightlight, in an interview with Investment Magazine.
The $1 billion superannuation fund is putting $250,000 from its operational reserves as a loan for seed capital and will be Brightlight’s first retainer client for impact consulting services.
Aside from the seed loan, Christian Super has 80 per cent equity ownership, with the remaining 20 per cent equity belonging to an organisation called the Brightlight Foundation.
Established with the same vision as Christian Super, Macready explains that the Foundation will carry out the mission of the superfund, to “see people living life with financial health and understanding” but in a charitable sense that goes beyond the superfund’s capabilities.
Brightlight encompasses two businesses – an investment advisory and an investment management business, both of which are owned by a holding company.
The investment management side will focus on making available to the broader wholesale institutional markets, asset-specific or diversified products that mirror Christian Super’s existing investment strategies.
The investment advisory business on the other hand, will be providing start to end services such as designing impact investment strategies, help with deal due diligence, and overall portfolio construction to enable asset owners to make hassle-free impact investments.
CEO of Impact Investing Australia, Daniel Madhavan says this move is especially significant for institutional investors.
“There is a fast growing interest amongst asset owners to allocate funds towards impact investments but many have found the road to deploying capital a challenge. The establishment of Brightlight is an opportunity for institutions to uncover that pathway by tapping into a set of knowledge that has been developed through a decade of real experience.”
“Most active impact investors are looking to increase the size of their portfolios, and those not yet active in the space, expect to consider social and environmental impact in investment decision making over the next 5 years. Brightlight will go a way to helping asset owners achieve this.
In an interview with Impact Investing Australia, Macready said that what sets impact investing apart from the rest of Christian Super’s portfolio are opportunities that offer “appropriate risk-adjusted returns that are strongly diversified and that, is a good position to be in.”
“We’ve done a lot of work internally and we’re satisfied that the impact investments we’ve made are a great addition to our diversified portfolio; we think over time the evidence is going to make that clearer and clearer, and more funds will follow suit.”
Christian Super has already seen returns in the impact investments it has made. Its pioneering investment in the NSW Government’s $7 million Newpin Social Benefit Bond in 2015, has resulted in a 8.9% return to investors, up from 7.5% in its first year since being issued in 2013. Internationally, it has invested in the US$400 million LeapFrog Fund II. The Fund’s investments aim to improve financial services access to under-served emerging market consumers in Asia and Africa.
Macready also identified a greater willingness to think big about the big problems that society faces across the industry through impact investment deals.
“Instead of trying to set up small funds to prove that the concept works, we’re now starting to talk about funds in the hundreds of millions of dollars. At that scale, it’s not unrealistic to dream about eradicating or making a very significant dent in some social problems.”