NEW YORK (Reuters) - The RockCreek Group plans to raise close to $1 billion for a new climate-related private equity fund, part of a broader bet that socially responsible investments will produce greater returns than traditional investments such as stocks, firm Chief Executive Afsaneh Mashayekhi Beschloss said on Wednesday.
The new fund will focus on relatively established private companies related to clean energy and water, such as those that produce parts for solar farms or companies involved with natural gas, seen as a transitional fuel to renewables.
Beschloss called the growth of renewable energy “huge” and said annualized returns could be around 12%, in line with traditional private equity funds and much higher than the mid-single digit percentage gains predicted for U.S. stocks.
“The alpha would be in finding growth opportunities at the best companies that are investing in climate-related things,” she said speaking at the Reuters Global Investment Outlook 2020 Summit in New York.
RockCreek, which manages approximately $14 billion for institutional clients through direct and private fund investments globally, was an early practitioner of investments based on environmental, social and governance (ESG) factors. Once dismissed by mainstream investors, the area has seen a recent influx of money.
Beschloss also said one of her top investment ideas - socially responsible or not - is affordable housing.
“(It) can be regulated or not regulated. It can be truly community-based, so you are providing health and other services,” she said.
She said there is still strong opportunity in affordable housing regardless of U.S. government loans and potential reforms of government-sponsored mortgage companies.
“Those returns are comparable with really any kind of opportunistic real estate investment,” she said. “As the real estate market goes through transition, this will be quite interesting.”
Globally, she linked part of the ongoing protests in Hong Kong to a lack of affordable housing. If more affordable housing were built, she said, “it would be good business, you would sell it to people, and it would definitely impact (the) demonstrators.”
(For other news from the Reuters Global Investment Outlook 2020 Summit, click here)
Beschloss said she expects some kind of economic slowdown, though not necessarily a full recession, by 2021.
“It’s not a five-year thing. It’s in the next two years,” she said.
As a result, she said the firm is looking to focus its investments on sectors that would be relatively unaffected by a downturn, such as private credit in the United States and Europe. She also said the firm was not investing in high-yield bonds and considering future bets on distressed companies.
Reporting by Lawrence Delevingne and Ross Kerber; Eiting by Steve Orlofsky