31
Jan

Social Finance, Social Hedge Funds

Written on January 31, 2007 by Max Oliva in Corporate Responsibility

J.Pozuelo-Monfort, MSc candidate in economic development at LSE.
Jaime PM.jpg
The recent regulation approved by the CNMV in Spain that triggered the expected marketing of hedge funds and funds of hedge funds, has also fostered some innovation and enabled the offering of alternative products.
A particular hedge fund that is as unusual as it gets is currently marketed by BBVA. It is a hedge fund that invests its proceeds in microcredits in Latin America. BBVA in cooperation with Codespa and a third-party conform the structure of the instrument.
The third-party is an auditing company that monitors the four institutions in Latin America that grant the microcredits to relatively poor individuals. The third-party, through its due-diligence process and reports, is able to signal which organisations do what and how. This enables BBVA to have the know-how to lend the proceeds to organisations that will, again, grant the microcredits in the field.
This is a relatively small hedge fund with a principal of EUR 20 MM. It is an instrument with a clear social impact that may also diversify the portfolio of a high net worth individual, with a clear social return. The upside is however not obvious… to what extent will this hedge fund offer attractive returns able to beat the market is questionable. The return is linked to the interest rates charged by the four institutions that grant the microcredits.
I am curious to know how this instrument is being marketed. If anyone reading this post has the time to ask at a BBVA branch, I would be happy to hear what they say in regards to this product, and how they compare it with other standard hedge funds that invest in the well-known strategies.
Products like this one will indeed have a clear impact on the developing world if they become popular.
Links to articles in spanish on the hedge fund:
Cinco Dias: El primer ‘hedge fund’ español es de BBVA y es solidario
El Pais:. BBVA lanza junto a Codespa el primer fondo de inversión libre.
El Mundo: Los Hedgefunds hablan español.
Yahoo Finanzas: El BBVA lanza los primeros fondos solidarios para Latinoamérica.

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