Funds of funds: Impact investing's quiet middlemen

This is article 10 of 14 in the Impact Capital series. Here is article 9.

General characteristics

Fund-of-funds (FoFs) have emerged as critical intermediaries in the impact investing ecosystem for emerging markets and developing economies, serving distinct catalytic and market-building functions that differ structurally from those of sovereign wealth funds, foundations or direct investors. FoFs are specialized investment vehicles that allocate capital across portfolios of underlying funds rather than investing directly into companies or projects. Their primary objectives include diversification, access facilitation, manager discovery and market development, often combined with explicit impact mandates focused on climate, financial inclusion, SME growth and inclusive development.

Globally, impact-oriented fund-of-funds manage assets exceeding USD 25 billion targeted at emerging and developing economies. Unlike direct investors, FoFs deliberately construct diversified portfolios across geographies, sectors, asset classes and manager types, allowing institutional investors to gain systematic exposure to EMDE impact opportunities through a single allocation. This diversification function is particularly valuable in markets characterized by fragmentation, information asymmetry and limited manager track records. FoFs typically operate with longer time horizons than commercial funds, reflecting both the extended J-curve dynamics of fund-of-fund structures and the developmental objectives embedded in many FoF mandates.

FoFs typically invest as limited partners in externally managed impact funds, taking minority positions across multiple vehicles rather than controlling stakes in single funds. This reflects their portfolio construction logic and their intermediary role between ultimate capital providers and front-line fund managers. In impact fund structures, FoFs usually enter at first or second closes, often alongside DFIs, foundations and impact-oriented institutional investors. Ticket sizes vary substantially depending on FoF strategy and target fund size, ranging from USD 5–10 million for emerging manager programs to USD 50–75 million for flagship climate or infrastructure funds, though median commitments typically fall in the USD 10–25 million range.

Geographically, FoFs active in EMDE impact investing originate from both developed markets (Europe, North America) and developing regions themselves. DFI-sponsored FoFs remain dominant, leveraging public mandates and risk tolerance to catalyze private capital into underserved markets and nascent manager ecosystems. Private sector FoFs, often managed by specialized impact asset managers or wealth management platforms, increasingly complement public FoFs by targeting specific themes, regions or return profiles. Blended finance FoFs, which layer concessional and commercial capital, have become particularly important in de-risking investments in frontier markets, early-stage managers and pioneering sectors.

Concrete investment cases

The following case studies illustrate how fund-of-funds translate diversification, market-building and access objectives into systematic exposure to impact-oriented investment strategies in emerging markets and developing economies through portfolios of underlying funds. In contrast to direct investors or large anchor institutions, fund-of-funds typically engage across multiple manager relationships simultaneously, favouring strategies that combine developmental catalysis with portfolio construction logic. Across the examples below, fund-of-funds appear as the primary investment vehicles, constructing diversified portfolios of impact funds managed by specialist platforms across climate, financial inclusion, SME finance and inclusive growth themes.

An example is the Emerging Market Climate Action Fund (EMCAF), a blended finance fund-of-funds launched in 2021 by Allianz Global Investors and the European Investment Bank (EIB). EMCAF reached final close at EUR 450 million in January 2025. The fund is expected to mobilize up to EUR 7.5 billion of climate finance in emerging and developing markets and plans to invest in approximately 15 specialized climate funds, which will in turn finance around 150 greenfield projects. EMCAF focuses primarily on renewable energy and energy efficiency (the majority of its portfolio), but also invests in sustainable transport, forestry, water/wastewater, and circular economy. The fund was endorsed by the G7 in 2022 as a model for mobilizing private investment in climate infrastructure and aims to catalyze approximately 9-10 GW of clean energy capacity. Anchor investors include KfW (Germany), Luxembourg, Nordic Development Fund, UK FCDO, Allianz, Folksam, and EIB Global. The fund follows a triple bottom line approach (People, Planet, Prosperity) and applies the EIB's stringent Environmental & Social standards. EMCAF has already made initial investments, including commitments to Alcazar Energy Partners II (USD 25m), South Asia Growth Fund III (USD 30m), and various Africa and Latin America-focused funds.

Oryx Impact is the first gender-lens and impact-oriented fund-of-funds with exclusive focus on Africa, targeting a fund size of USD 250 million. The fund invests in local Private Equity, Venture Capital, and Private Debt funds with strong local presence and networks, with particular emphasis on women-led and emerging fund managers. Oryx Impact pursues three core impact objectives: economic development and job creation, climate change mitigation and adaptation, and gender equality, with the overarching goal of building sustainable and resilient societies in Africa and reducing forced migration. The team has screened over 220 impact fund managers in Africa and shortlisted approximately 60, with about 25 currently in due diligence. The fund will support 15-20 funds with a minimum size of USD 30 million and expects to create over 100,000 formal jobs, generate 23,000 GWh of additional clean energy, and support over 2,200 women in senior management positions. Oryx Impact also provides a Technical Assistance facility to professionalize ESG and Impact Measurement & Management practices among emerging fund managers. The fund is based in Barcelona and was co-founded by Teresa Guardans, with a predominantly female team.

A second example is the Impulso Global Fund of Funds, managed by Portocolom, which is the first Private Markets fund-of-funds in Spain with Article 9 SFDR classification. Impulso reached final close at EUR 40 million. The fund is a partnership between Cardumen Capital (alternative investment manager with over EUR 300m AUM) and Portocolom AV (independent investment advisory with nearly EUR 1 billion AuM/advisory). Impulso Global pursues a multi-asset architecture, investing in Venture Capital, Growth Equity, Private Debt, and Infrastructure funds across six priority themes: education, health, financial inclusion, climate change, sustainable agriculture, and water & sanitation. The fund combines Cardumen Capital's extensive private markets investment experience with Portocolom's proprietary methodology and technical rigor in sustainability and impact. The portfolio's core thesis is the compatibility of real impact, global diversification, advanced governance, and financial discipline. Portocolom AV was founded in 2008 and specializes in advisory, management, design, and monitoring of sustainable portfolios with a holistic approach ranging from Socially Responsible Investing through ESG integration to Impact Investing.

A third example is the IFC Global Emerging Markets Fund of Funds, which is part of the IFC Asset Management Company (IFC AMC) family and invests in Private Equity funds, secondaries, and co-investments in emerging markets worldwide. Fund management is led by an experienced team with over 30 years of experience investing in private equity and secondaries in emerging and developing markets. The fund aims to create access to high-quality managers in emerging markets that would otherwise be difficult for institutional investors to reach through investments in local and regional PE funds. IFC AMC, as a development finance institution, has both development objectives and commercial return targets, focusing on funds that contribute to job creation, economic growth, and private sector development. The team combines IFC's institutional expertise in development finance with specialized fund-of-funds management expertise. The investment strategy encompasses primary investments in PE funds, secondary transactions for portfolio optimization, and selective co-investments for diversification. The exact fund size is not publicly available as IFC AMC manages multiple FoF vehicles under this strategy.

A fourth example is the Global Energy Efficiency and Renewable Energy Fund (GEEREF), a public-private partnership fund-of-funds launched in 2008 by the European Commission and currently has EUR 222 million under management. The fund invests exclusively in specialized Private Equity funds for renewable energy and energy efficiency that finance small to medium-sized projects (typically under EUR 10 million) in developing countries and emerging markets. GEEREF is advised by the EIB Group, combining the EIB's institutional expertise in climate mitigation investments with the EIF's fund-of-funds management expertise. The original funding of EUR 112 million came from the EU, Germany, and Norway, with the goal of mobilizing similar amounts of private capital. It is estimated that GEEREF, with its EUR 222 million, can mobilize over EUR 10 billion through co-financing of target funds and their projects. The fund follows a triple bottom line approach (People, Planet, Profit) and invests in regional sub-funds in Sub-Saharan Africa, East and South Asia/Pacific, Non-EU Eastern Europe/Russia/Central Asia, Latin America/Caribbean, and Middle East/North Africa. GEEREF focuses on sectors such as solar, wind, small hydro, biomass, geothermal, as well as energy efficiency solutions like waste heat recovery and co-generation. By the end of 2013, GEEREF had signed commitments to 6 funds across Africa, Asia, and Latin America.

A fifth example is Africa Grow, an Africa-focused Private Equity fund-of-funds launched in late 2019 by Allianz and KfW with a target size of EUR 170 million. The fund invests in African Private Equity vehicles to promote private sector development, employment, and economic growth on the continent. Africa Grow uses a blended finance structure that combines both DFI and private capital to reach more African companies and countries than would be possible through direct investments. The fund has an explicit development finance focus and aims to support the development of the African private equity ecosystem through investments in local fund managers. The partnership between the commercial asset manager Allianz and the German development bank KfW enables the fund to attract institutional investors who would otherwise consider the risk-return profile of African PE funds too risky. Africa Grow conducts impact measurement and has an impact thesis focused on income generation and job creation in Africa. Details on specific portfolio investments and current deployment status are not publicly available.

A sixth example is Averroès Africa, the fourth fund-of-funds in the Averroès series by Proparco (AFD) and BPI France, launched in 2020 with a target size of EUR 100 million (first close at EUR 55 million). The three predecessor funds have channeled over EUR 1.2 billion into approximately 20 Private Equity funds and over 150 companies in 40 African countries since 2003. Averroès Africa invests in multi-sectoral Private Equity funds with multi-country, regional, or pan-African focus managed by experienced teams, with increased emphasis on Venture Capital and, for the first time, sectoral funds in financial services, health, and agribusiness. With a target portfolio of 10-12 funds, Averroès Africa will create exposure to over 100 African companies (from start-ups to midcaps), particularly in sectors serving the emerging middle class such as consumer goods, transport/logistics, industry, education, and TMT. The fund actively focuses on maximizing ESG impacts and aims to generate deal flow between African portfolio companies and French companies. Projected impacts based on predecessor funds: EUR 32.4 million annual contribution to tax revenues in Africa, support for approximately 4,700 indirect jobs in about 30 companies over 5 years, including 1,000 newly created jobs. The fund is open to French and foreign public and private third-party investors.

Taken together, these examples show that fund-of-funds occupy a distinct intermediary position in the EMDE impact investing ecosystem. They are neither pure capital providers nor direct executors, but portfolio constructors and market builders that systematically channel capital from institutional sources to front-line impact fund managers. By investing across multiple underlying funds, FoFs enable diversification, facilitate access, validate emerging managers and contribute to market infrastructure development. While their structures introduce additional fee layers and extended time horizons, FoFs remain essential mechanisms for mobilizing institutional capital at scale into fragmented, information-poor and capacity-constrained impact fund markets across emerging and developing economies.

Current trends

Looking ahead, fund-of-funds are expected to play an increasingly strategic role in impact investing in emerging markets, particularly in climate finance, manager ecosystem development and blended finance innovation. One key trend is the growing sophistication of portfolio construction methodologies, moving beyond simple diversification toward intentional allocation across manager types, development stages, geographies and impact themes to maximize both risk-adjusted returns and developmental outcomes.

A second trend is the proliferation of specialized FoF strategies targeting specific market gaps. Climate-focused FoFs, gender lens investing FoFs, African manager FoFs and local currency debt FoFs reflect increasing investor demand for thematic precision combined with portfolio diversification. This specialization enables FoFs to develop deeper sector expertise, stronger manager relationships and more credible impact measurement frameworks while maintaining systematic exposure.

A third trend is deeper integration of capacity building and technical assistance into FoF mandates. Recognizing that manager quality and institutional development are critical bottlenecks in EMDE impact investing, leading FoFs increasingly bundle capital deployment with manager training, governance support, ESG implementation assistance and impact measurement resources. This evolution positions FoFs as ecosystem developers rather than passive capital allocators.

Despite these positive developments, FoFs face persistent challenges. Fee structures remain contentious, as dual management and performance fees can compress net returns for ultimate investors. Liquidity mismatches between FoF investors and underlying fund commitments create redemption risks in volatile markets. Information asymmetry and due diligence capacity constraints continue to favour established managers over emerging platforms, potentially undermining ecosystem diversity objectives.

Nevertheless, fund-of-funds remain indispensable infrastructure in EMDE impact investing. Their ability to aggregate capital, diversify risk, validate managers and build market ecosystems positions them as critical intermediaries between large institutional capital pools and fragmented front-line fund markets. Where FoFs operate with clear strategic mandates, appropriate risk tolerance and genuine commitment to market development, they can materially accelerate the depth, breadth and sustainability of impact fund markets in emerging and developing economies.

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