Our Chief Investment Officer, Fred Kooij and Chief Impact Officer, Amy Clarke, were asked by Citywire Wealth Manager – Word on Wealth Street – what our best investment decision has been. A difficult one to pick, but our CIOs chose microfinanceMicrofinanceA type of banking which provides financial services to low income individuals or groups of people who would otherwise have no access to finance. read more given its steady and uncorrelated investment returns and positive social impact focused on financial empowerment and gender equality.
In 2017, we allocated to microfinance for clients in discretionaryDiscretionaryInvestment decisions are made by an advisor rather than the end client. read more portfolios. We partner with two of the most credible microfinance funds in the market, as we are keenly aware of some of the controversies with investing in microfinance (e.g. prohibitively high interest ratesInterest rateThe fixed return investors receive on debt securities. Usually refers to the rate set by Central Banks from which other debt instruments are valued. read more for the end users).
Given its diversification of end borrowers and location, and very low default rates, microfinance generates steady and uncorrelated returns to the wider markets which is extremely attractive, especially in volatile markets. This was demonstrated throughout 2018, when it was one of the biggest contributors to our overall performance.
Microfinance also affords us strong impact given its focus on financial empowerment, specifically through the lens of gender equality. Investing in women helps deconstruct patriarchy and reduce poverty and it plays a powerful role in the creation of more egalitarian societies. Finally, both funds we use have beneficiary ratios in excess of 75% female.