WPG07-09 - Working Papers in Employment, Work and Finance - Transformations: Economy, Society and Place - Research

Working Papers in Employment, Work and Finance: WPG07-09

Investment intermediaries in economic development: Linking pension funds to urban revitalization.

Lisa A. Hagerman, Gordon L. Clark, and Tessa Hebb

University of Oxford, School of Geography and the Environment, and Harvard Law School, Pensions & Capital Stewardship Project, Labor and Worklife Program.

Large institutional investors, such as public sector pension funds, invest in affordable housing, mixed-income and mixed-use real estate, and emerging growth companies under the rubric of urban revitalization or economic development. Investment intermediaries link institutional investors to urban revitalization. As a pension fund does not have urban investing expertise they turn to an investment intermediary, often referred to as an investment fund manager or termed "investment vehicle", to deploy large pools of capital into the community. The money managers are able to take large dollar amounts and parcel the funds into attractive urban investments. They have the expertise to structure a deal in a community partnership that delivers high financial returns to the investor and social returns to the community. An investment vehicle can have in-depth expertise investing in large-scale property development and mission-oriented companies. Community partners also act as an intermediary between the investment vehicle and the urban community. The community organization can ensure that the ancillary social goals are realized. We argue that without these intermediaries large institutional dollars could not be deployed in the underserved markets and could not achieve the targeted financial and social goals.

Keywords: Economic development, investment vehicles, public sector pension funds.