Another day, yet another new fund.

I realise I’m sounding like a broken record player, but the sheer flow of new funds being launched on the UK market is proving increasingly difficult to keep track of. So, another day, another fund. But at least this time it’s a bit different i.e. it’s not another alternative income or property fund. The new fund is called the Impact Investment Trust and its focus is genuinely different — on impact investing. In effect, this is the sharp end of ethical and social investing — rather than tilting a conventional portfolio of stocks towards more ethical or green mainstream businesses, impact investing looks for genuine pioneers capable of producing bumper investor returns from genuine social innovation. In the UK, for instance, this might mean putting money to work on impact bonds that help fund genuine rehabilitation for ex-prisoners — the investor’s only make money if levels of repeat offending are greatly reduced.

It’s an approach I have a huge amount of time for, especially in the developing world. In large swathes of Africa, for instance, a sensible amount of money deployed in the right context can produce huge social benefits — and give investors a big return. Travel around a country such as Uganda for instance (I was there last Christmas) and you can see some obvious examples not least the endless shops selling solar panels for lease via mobile telephone services. Pay for the solar panel on a weekly basis via your phone and … hey presto….you have some light so that your children can read at night.

The Impact Investment Trust aims to tap into this market via a fund listing, raising $150m via $1 shares. The open offer closes on 5 July and the fund is supposed to hit the main market — and the parallel Social Stock Exchange — on July 10th. Proposed ticker is MPCT.

I haven’t dug too deep yet on the fund, but the prospectus does have a wealth of information.

For me there are three crucial considerations:

1. What qualifies as impact investment?

2. How will the manager source the investments that will produce an overall return of 8% per annum

3. IS there enough capacity within the impact investment market for a $150m fund?

The investment adviser Obviam AG has helpfully provided with an active definition of its three key pillars for defining impact investment:

Pillar 1: investing in high impact sectors;

Pillar 2: providing growth capital to SMEs; and

Pillar 3: building responsible businesses

In terms of sectors, we’re looking at: Education, healthcare, small scale energy production, basic infrastructure, access to financial services, agriculture and forestry.

The main mechanism for achieving this is to invest in SMEs via a portfolio of 10 plus fund managers.

I’ve put some basic information culled from the prospectus below, with more information about the fund manager.

I’ll let readers make their own assessment but I would add some observations:

1. The fees at 1.05% look a little on the high side but then again this is a complex sector requiring lots of due diligence

2. The biggest sector focus of the fund seems to be on infrastructure and energy which seems smart — huge potential in this space

3. The investment managers Obviam seem to know this space well but I would observe that to date they’ve only actually invested $800m in total after a few years. $150m in fresh new capital might be something of a stretch for these Swiss specialists

4. The recent track record for more ESG focused investment trusts hasn’t been great. A little more than a year ago Menhaden Capital launched a closed end fund targeting stocks with a green or energy efficient angle (including Airbus and VW?). NAV returns have been half decent so far at an 18% gain but the share price has done as well, rising a mere 3% over the year. The fund now trades at a whopping 28% discount.

5. The devil is in the detail working with SMEs in emerging markets. It is an enormous potential market but understanding the balance sheet risks is only one factor — political and regulatory risks are very real as are the obvious Fx concerns.

From the Prospectus, the fund will

“- seek to primarily invest in a portfolio of approximately 10 to 15 SMEs that are primarily seeking capital to expand;

– seek to primarily invest in a portfolio of businesses that operate in high impact sectors including education, healthcare, small scale energy production, basic infrastructure, agricultural and forestry value chain, financial services and other sectors with objectives of job creation and growth of local economies; and

– have a commitment to improving the underlying portfolio companies’ management of environmental, social and governance issues and to contributing to the sustainable development of the companies that make up the underlying portfolio. The Company’s target underlying portfolio composition shall predominantly be of growth capital investments in SMEs across sectors, with a focus on high impact sectors.

– Whilst the Company is seeking to prioritise investments in Underlying Funds that have an investment mandate to invest in growing SMEs, the Company may invest in Underlying Funds that invest in larger businesses where the Board, in its absolute discretion, deems it to be consistent with the investment objectives of the Company.

– The Company may make commitments to Underlying Funds managed by investment managers with or without a track record, with no restrictions save as set out in the section headed “Investment restrictions” below. The Company will generally invest in Underlying Funds that invest in countries with a nominal GNI per capita (calculated using the Atlas method) of less than US$12,000 at the time of commitment, primarily in Africa, Asia and Latin America.

– The Company aims to achieve this by selecting Underlying Funds that apply such a limitation to their entire portfolio of investments, or by negotiating specific rights with an Underlying Fund to ensure that the Company shall only participate in the fund’s investments that meet this criterion.

– The Company shall generally invest in Underlying Funds with committed capital of US$50 million to US$200 million, and shall not invest in Underlying Funds with committed capital at first-closing in excess of US$250 million. Once the proceeds of the Issue are fully invested, the Company’s portfolio is expected to comprise of 10 to 15 Investments.”

Fees? “ The Investment Adviser is entitled to receive from the Company an advisory fee of: (i) 1.05 per cent. per annum of the Net Asset Value of the Company less all Uncommitted Cash; plus (ii) 0.5 per cent. per annum of all Uncommitted Cash.”

So, who is Obviam? According to the prospectus it “ is an independent investment adviser specialised in long-term investments in developing countries, with mandates in respect of over US$800 million of assets. Obviam focusses on opportunities to capture attractive returns and generate sustainable positive impact in developing countries, via a proven and responsible investment approach. Obviam is one of the few investment advisers with a track record of over 10 years in developing country private equity fund investments. Obviam has focused exclusively on developing countries, diversifying globally into Africa, Asia, Eastern Europe and Latin America and developing a wide network of relationships in these markets. In 2010, Obviam’s predecessor, SIFEM, the development finance institution of the Swiss Confederation, won the G-20 SME Challenge Award for innovative investment solutions to unlocking access to finance for small and medium-sized enterprises in developing countries. The Investment Adviser’s team has over a decade of private equity investment experience in developing countries. The team comprises twelve investment professionals covering South East Asia, Latin America, Eastern Europe and CIS, Northern Africa, and Sub-Saharan Africa, and is backed by dedicated environmental, social and governance and impact management resources and administration staff. “

To date, Obviam’s key executives have overseen investments of approximately US$900 million in 80 funds and 650 underlying SMEs in developing countries. As at 31 December 2016, Obviam has CESR assets under management of approximately US$800 million. The SECO8 /SIFEM portfolio, which Obviam’s key executives have overseen since 1998, has achieved a net IRR of 9.6 per cent. from 30 September 1995 to 30 September 2016 on investments that would satisfy the Company’s investment policy