Magallanes has launched a social impact fund investing in financial institutions that give microcredits to deprived people in developing countries.
The fund, aimed at generating annual returns of between 2% and 4%, will count on the advisory of Gawa Capital Partners, which will recommend the Spanish manager on which institutions to invest while monitoring their activity.
According to Magallanes, microcredits have proved to be an asset class decorrelated from the rest of financial markets providing diversification while investing with a sustainable social impact measurable in time.
The new fund will keep always a minimum liquidity of 10% allocating the rest of its total exposure to unlisted senior debt of these institutions, which need to manage at least €15m in assets.
The fund’s portfolio will comprise six assets with an average nominal value of €1.5m each of them. It will not invest more than 40% of its portfolio in the same country nor more than 15% in the same issuer.
The fund’s prospectus leaves an open door to future investment in derivatives, quoted or not in organised derivatives markets, as a hedge. The maximum indebtedness will be 25% of the fund’s assets, and will be used to cover repayments that cannot be covered by normal operations.