When he’s not busy being the owner of the Chicago Cubs, Tom Ricketts is overseeing Incapital, which underwrites and distributes fixed income securities and structured notes through more than 700 broker-dealers, institutions, advisors and wealth managers.
Since 2005, Incapital has helped the Calvert Foundation raise more than $165 million through its Calvert Foundation Investment Note. The money raised goes to supporting such things as affordable housing, community services, job creation and micro-loans. Calvert Foundation, which makes loans below market rates to community organizations, estimates that investments through the note have created more than 200,000 jobs in the United States and in developing countries.
The Calvert Foundation reported in July that most of the 1,065 advisor respondents in its “Gateways to Impact” study were willing to recommend sustainable investments to about a third of their clients and would allocate between 10% and 20% of those portfolios to the products.
This means that on average, advisors in the United States are willing to place 2.5% of their total assets under management in sustainable investments for a market potential of $650 billion, according to Calvert.
While other “impact investment” firms exist, they just deal with accredited investors and “do not have a retail investment program” like the Calvert Foundation, says Justin Conway, director of investor relations at the Calvert Foundation. “There’s nothing exactly like” the Calvert Foundation Investment Note.
The Calvert Foundation Investment Note “takes a dollar and puts it into a community,” says Ricketts.
Ricketts spoke to Investment Advisor in early August about Incapital’s relationship with the Calvert Foundation and advisors’ interest in socially responsible and impact investing.
Why raise awareness about the Calvert Note now?
Ricketts: The conversation has changed, particularly in the kind of rate environment we’re in and with the uncertainty around stocks; people are more open to this type of investment. Over the years, Incapital has been pretty good at anticipating what advisors need and this is one [investment] that if people knew more about it, they’d use it.
Given that advisors are looking for new ideas, impact investing is getting more coverage and interest rates are low, [so now’s] a good time to get the word out. On top of that, this has been a little project that we have worked on for years, and I would like to see it grow.
Incapital is distributing the Calvert Investment Note through broker-dealers.
Ricketts: We make it available to over 600 broker-dealers. We’ve had 79 BD firms purchase the note, and this year we are on pace to sell about $50 million, up from $23million last year.
Last year, Incapital underwrote almost $45 billion worth of bonds. So [supporting the Calvert Foundation Note] is just a nice thing we do on the side to help a worthy cause.
So you’re seeing more interest from advisors—and investors--in socially responsible investments these days?
Ricketts: If you look at the Calvert Foundation [Gateways to Impact] study, about 75% of the advisors [polled] are interested in more socially responsible investments. But as the study notes, there are barriers [to advisors using these socially responsible products]; one being the track record with the investments, but this is where the Calvert Foundation shines. Everybody receives their principal and investment back; the losses never touch investors.
Brokers have also had a lack of information about these types of investments, but [Calvert Foundation makes] the information available; it’s a completely transparent alternative.
As far as client demand, when people hear [the Calvert Foundation Investment Note] story, they like it, and the trade-offs aren’t so dramatic given where interest rates are.
And the returns?
Ricketts: Two percent on a five-year note.
How are the Cubs these days?
Ricketts: We’re restocking; we’ve got the best guys in baseball.