Realize Capital Partners has closed one of Canada’s largest social-impact investing funds, raising $141.7-million from private investors and matching it with federal funding for a total of $276.7-million in support of sustainable development goals.
A subsidiary of Toronto-based impact investing company Rally Assets, Realize Capital was one of three funds selected by Ottawa in 2023 to manage $400-million of total funding aimed at expanding the country’s social finance market.
Social finance aims to invest in areas that create a positive impact for society, such as climate-change mitigation, affordable housing, health care and racial equity, while delivering competitive returns when compared with strictly commercial funds.
The federal government provided $135-million in seed capital to Realize Capital to launch and start making investments through a fund-of-funds strategy, by which it takes stakes in a collection of funds run by other managers.
It has since made 24 investments worth $111-million with 23 social-impact funds, many of them new or emerging investment managers.
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In a sluggish market for fundraising, Realize Capital raised money from 32 limited partners, more than two-thirds of which made commitments to social finance for the first time.
Those partners include established impact investors such as the McConnell Foundation and Trottier Family Foundation. They also include large institutions such as Royal Bank of Canada, Bank of Nova Scotia’s Roynat Capital division and investment firm RockCreek Canada, as well as Concordia University, which put $25-million into Realize Capital’s fund last year.
“It’s definitely been tricky” raising money in a down market for private-asset investors, Realize Capital president Kelly Gauthier said in an interview. The fund spoke to more than 500 investors to make its pitch and explain its social-impact mandate.
Many institutional investors are waiting longer than usual to get funds back from previous investments, and doling out spare cash carefully, creating stiff competition among a glut of new funds coming to market.
But the close of Realize Capital’s first fund is proof that “there is institutional interest” in social-impact investing, she said. “This is not charity. They’re looking to make a healthy return as well as have great impact.”
Realize Capital is aiming for gross investment returns in low double digits in percentage terms, or net returns after costs and fees in the high single digits, portfolio manager Lars Boggild said. For the most part, the fund’s performance will be benchmarked against conventional market yardsticks.
The federal government’s significant stake in the fund also helped attract institutional investors by assuming some of the risk in making new investments. The funds Ottawa provided are mostly expected to be repaid.
Realize has pitched itself as a way to connect larger institutional investors making one single funding commitment to smaller funds with a range of social mandates.
Some examples of Realize Capital’s investments so far are affordable-housing developer and property manager Heartwood Trust, a fund investing in cancer therapies and technologies run by Lumira Ventures, and Maple Bridge Ventures, which invests in immigrant-led startups.
Realize Capital has also invested in Indigenous-led private credit fund Keewaywin Capital Inc., which is working to build affordable housing in Indigenous communities on and off reserve.
In some cases, Realize Capital acted as an anchor investor in smaller, newer funds, which helped those funds attract more investors of their own.
“This is a space that is continuing to grow, it’s continuing to mature,” Mr. Boggild said. “This close is a signal of that wider trend of more mainstream actors participating in a more material way.”
