NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Brad Barber

Graduate School of Management
One Shields Avenue
3218 Gallagher Hall
University of California
Davis, CA 95616
Tel: 530-752-0512
Fax: 530-752-2924

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: University of California at Davis

NBER Working Papers and Publications

December 2019Impact Investing
with Adair Morse, Ayako Yasuda: w26582
We document that investors derive nonpecuniary utility from investing in dual-objective VC funds, thus sacrificing returns. Impact funds earn 4.7 percentage points (ppts) lower IRRs ex post than traditional VC funds. In random utility/willingness-to-pay (WTP) models investors accept 2.5-3.7 ppts lower IRRs ex ante for impact funds. The positive WTP result is robust to fund access rationing and investor heterogeneity in fund expected returns. Development organizations, foundations, financial institutions, public pensions, Europeans, and UNPRI signatories have high WTP. Investors with mission objectives and/or facing political pressure exhibit high WTP; those subject to legal restrictions (e.g., ERISA) exhibit low WTP.
 
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