Mission Driven Finance launches MDF Capital Partners to provide runway for emerging fund managers, addressing barriers in impact investing
September 23, 2024 (SAN DIEGO, CA) — The asset management industry remains alarmingly homogenous, with diverse-owned firms managing just 1.4% of assets under management (Knight Foundation). According to a study by Samata Capital, the industry is missing out on an estimated $4 trillion in untapped value by not investing in more diverse managers.
Raising for new impact funds has also become more challenging, with fundraising timelines now stretching to 18–24 months or more, particularly for underrepresented fund managers outside conventional circles of wealth. These extended raise timelines make launching a fund especially difficult for women and people of color who have fewer personal assets to draw on.
To make it easier for underrepresented fund managers to bring forward innovative impact investment strategies, Mission Driven Finance® launched MDF Capital Partners 2023, LP (“MDF Capital Partners”), a national, diversified private credit portfolio aimed at moving capital to historically underinvested communities. MDF Capital Partners addresses common barriers the impact asset management firm has seen across dozens of impact fund raises, particularly gaps in proof, size, and timing.
“We repeatedly hear from emerging fund managers how their raise timelines have stretched out as investors’ diligence and deployment cycles remain very slow,” said Mission Driven Finance VP of Capital Initiatives Stephen Nunes. “The two-year process it can take to get a fund capitalized makes it extremely difficult for managers without personal networks of wealth to build a fund while keeping the lights on.”
Because of these challenges, the fund focuses on supporting underrepresented impact fund managers and project sponsors by offering critical financing tools such as bridge financing, working capital advances, warehousing, co-investment, and subscription lines. These solutions help fund managers demonstrate their theses to prospective investors, move faster, and attract more capital.
MDF Capital Partners held its first close in June 2024, with support from leading impact investors, including World Education Services (WES) Mariam Assefa Fund, Tara Health Foundation, Trimtab Impact, and Chordata Capital totaling $4.4 million. Mission Driven Finance continues to raise capital through the end of the year, aiming for a $10 million demonstration vehicle.
“We are excited to be an early investor in this new fund and deepen our partnership with Mission Driven Finance, one of WES’ inaugural grantee partners,” said Smitha Das, director of mission and impact investing at WES. “Through our impact investments, WES seeks to address capital access gaps in the market for under-resourced and overlooked communities, often acting as first movers to mobilize others.”
The fund has executed several deals, including iimpact capital, founded and led by Ada Arevalo, a first-time fund manager focused on providing equity financing for women real estate developers of color in affordable housing. Arevalo needed working capital to support operations ahead of the fund launch.
MDF Capital Partners provided a bridge commitment loan, allowing Arevalo to meet critical deadlines. She shared, “As a seasoned executive in capital markets and fund management, I understood the challenges of raising working capital in the toughest fundraising environment since 2008. Mission Driven Finance’s proactive, solution-driven approach and unwavering support underscored their significance as a vital partner in the impact space.”
“The state of the world requires us all to bring forward new solutions and novel investment approaches,” explained Mission Driven Finance Co-founder and Chief Community Officer Lauren Grattan. “However, the newness of an exciting thesis can create friction for investors who don’t have a benchmark to assess it against. That’s one place MDF Capital Partners can play a role—helping to warehouse initial transactions for impact funds and provide a proof point for how a new thesis could play out in the market.”
MDF Capital Partners will hold rolling closes through the end of 2024. Interested investors can reach out to invest@missiondrivenfinance.com to learn more about this opportunity.
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ABOUT MISSION DRIVEN FINANCE
Mission Driven Finance is an impact asset management firm dedicated to building a financial system that ensures good businesses have access to sufficient, affordable capital. Built from the ground up with a single purpose—to make it easy to invest in your community—all of their funds and structured products are designed to close financial gaps that will close opportunity gaps. They work with local and national investors to help them create the impact they want and work with businesses and community partners to help them get the capital they need. Mission Driven Finance was launched in 2016 in San Diego, CA, and is a Certified B Corporation. In 2024, Mission Driven Finance was selected again for ImpactAssets’ IA 50 Fund Manager list, a category for experienced impact fund managers with a minimum three-year track record. Learn more at missiondrivenfinance.com.
MEDIA CONTACT
Wilda Wong
Mission Driven Finance
wilda@missiondrivenfinance.com
858-880-0252 x708
