Money-making investments in altruismMay 2010
The Altru Fund claims to be overturning the notion of a conflict between social and commercial returns by treating social enterprises like normal businesses. Mike Scott speaks to managing partner Chris Falster
Run by Aros, a new Anglo-Danish investment manager, the Altru Fund describes itself as a global altruistic opportunities fund, offering its investors the opportunity to invest and do good at the same time. According to managing partner Christian Falster, it ‘challenges the notion that social returns are a trade-off with commercial returns’.
It’s important to bring a commercial approach to social investing, he says. ‘Charity has many challenges, so we thought why not put our financial brains to work to see what we can do. We are trying to make charity more efficient.’ The fund aims to invest in businesses with a social or environmental bent, but unlike many charity donors or venture philanthropists, the aim is that the businesses receiving the money then scale up their operations and become sufficiently robust to be able to pay back the cash. ‘We can provide capital and know-how to people that need it to help them make a difference in their communities,’ Falster says.
Altru believes that the discipline required of the businesses in which it invests – ranging from renewable energy to education, and from telecoms to health – will also help make them more sustainable. ‘Many people don’t want grants, they just want to be able to borrow money on commercial terms,’ he continues. In the same way, the fund, though partly supported by Aros, must also be able to stand on its own.
Altru will offer those who invest – ranging from institutional investors to high net worth individuals or family offices – a return on the money that they commit. ‘This is a style of philanthropy that appeals to family businesses, because they can see the money is being put to good use. It chimes with their values,’ says Falter. The fund also fills a gap in the activities of institutional investors, he says.
Falster believes that investing in social enterprise has more impact than charitable giving – because businesses create employment, while commercial experience provides on-the-job training for employees. Helping a young business to get on its feet creates a lasting, sustainable entity that can survive on its own and establish long-term income for its employees.
One of the fund’s early deals was to help a UK-based online retailing group that provides another outlet for products from developing countries apart from the large supermarkets, which offer large orders but low margins.
‘We’re aiming for the “missing middle”. There are quite a few very early stage investors – angel investors, charities and others – that are willing to take a risk to invest in start-ups. However, a lot of companies struggle to get to a size and complexity that will attract commercial private equity. That’s where we can make a real difference.’
The fund is aiming to raise €10million and to offer investors an eight per cent return, which they can re-invest in social enterprises if they want to. The average deal size will be about €1m. The fund will invest in European Union-domiciled companies only, simply because they are easier and cheaper to research and monitor. But that does not mean their activities will be limited to the EU. ‘We have ambitions for this fund to have a global impact,’ the Altru chief says.
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