SEFEA Impact: Why patient capital should also be friendly

Why is “friendly capital” better than “patient capital”? Massimo Giusti, President and Managing Director of SEFEA Impact, the only impact asset management company in Italy, shares his perspectives on the value of multi-stakeholder governance for the success of an impact fund. Read more about why SEFEA said no to the European Investment Fund and how they convinced over 20 institutional investors to subscribe to SEFEA Impact fund.

Interview by Laura Catana, FASE / Photo: Massimo Giusti © SEFEA Impact

Massimo, what is so special about the Italian impact ecosystem that it led to the creation of SEFEA Impact?

In Italy, we have a very developed and diversified third sector. But the most advanced form of social enterprises are social cooperatives, which employed more than 500,000 people in Italy in 2017. These organisations are hybrid entities with a clear non-speculative nature, but they have long suffered from under-capitalisation. Investors can enter into a shareholding or membership as funding investors or members (“socio sovventore”) and receive annual dividends[1], but they cannot benefit from any capital gains (i.e. make a certain return multiple) upon exit. This circumstance and their democratic governance structure, have been seen as an obstacle for their capitalisation rather than a value protecting their missions. Our aim is to provide a solution that can boost the growth of these unique organisations. Social cooperatives have proved to create incredible impact and showed great resilience in times of crisis. Therefore, we wanted to establish a fund that deeply understands these unique organisations and can invest “friendly capital” in them and in the broader third sector. Having said this, we do not exclude novel impact ventures and social enterprises that have more classic limited liability structures and traditional exit strategies.

[1] Dividends can be paid provided the cooperative is profitable and only after filling the obligatory reserve. Moreover, dividends are capped by law.

In the impact sector, we often talk about patient capital, but I never heard the expression “friendly capital” – how would you define it?

Well, patient capital is waiting for you, which is a good thing. But friendship accompanies you during your entire life. With friendly capital, you take a different perspective on how you perceive and play the investor role. We want to accompany both our investees and our investors and be part of a network of friends, who  help each other financially and provide strategic, commercial and impact management support.

SEFEA investment: Riesco

Could you tell me more about your fund and its investment thesis?

My predecessor started in 2017 with the goal of setting up a 50M EUR fund. I can tell you, this has not been an easy ride. Fast forward to 2019 when I joined, SEFEA was struggling. With a leaner team of very motivated professionals, we re-thought the entire philosophy of the fund and took some harsh decisions, such as saying no to a large equity stake from the European Investment Fund (EIF). But we went out of this process with a brand new strategy: to create a truly multi-stakeholder fund, deeply embedded in the third sector, with integrated, small regional players.  These regional players would not only act as investors but as partners of a network of investors, who share more than just financial resources with each other. From the start, we benefited from Fondazione Comunità di Messina’s support, who was already an active shareholder in SEFEA Holding and brought along Fondazione con il Sud. Today, we have a network of 22 investors with very different profiles, ranging from “banking foundations” (a specific form of private, non-profit entities with unique features created in the context of the privatisation and consolidation process of the Italian banking sector in the early 1990) to classic grant-making foundations, pensions funds, the Holy See, as well as banks and insurance companies.

What have you achieved in terms of investments so far?

We have raised  41M EUR to date and aim to close with 50M EUR by the end of the year. So far we have invested about 13M EUR in about 19 ventures, out of which about 70% are social cooperatives. We can invest in any sector but want to see some traction in the market first. To diversify, we enter both growth and Series A rounds. But most importantly, we want to ensure that the impact is intrinsic to our investee’s business models. Even when we exit, these ventures should maintain their impact missions.

So what happened with the EIF? Why did you decide to let this opportunity pass?

It was an interesting decision because we were in trouble at that time but knew that such a contract would not be aligned with our goals for the impact fund. First of all, the EIF has strict investment rules, – for example on returns or on governance-, that are incompatible with our model and vision. Another difficult point was the EIF’s understanding of alignment of interests, specifically the requirement that managers have to put rather large amounts of their own capital into the fund. Not only was this impossible for us, but it was also not aligned with our work culture and philosophy. We are active in this field because we believe in its power to make a positive change. Money is definitely not the only thing that keeps our interests aligned. Last but not least, there were disagreements on the fees to be paid. Fortunately, we turned this experience into an opportunity to reflect on how we can attract those investors, who are intentional about impact and lock the impact mission of the asset management company.

SEFEA investment: Amicar

This is very interesting. How did you manage to lock your impact mission?

Firstly, we decided to decrease the share of SEFEA Holding in the asset management company to below 50%. In this way, we ensure that one shareholder cannot make strategic decisions alone, even if SEFEA Holding is by nature a non-profit, a cooperative of ethical banks. Secondly, we decided that the asset management company should be majority-owned by non-profit entities, the third sector and grant-making foundations. We didn’t go for wholly owned, because we believe there is value in having diverse shareholders. Our statutes will be changed now, in September. But these are just the first steps: My dream is that we transform the company into a social enterprise, according to Italian law. This will have clear implications on the limits of profit distribution and management remuneration. Such a transformation would make it even more apparent that speculation is not our goal. While we do need to generate returns, we want to achieve them based on ethical behaviour that is oriented towards the wellbeing of the community, our investors and our staff.

“My dream is that we transform the company into a social enterprise, according to Italian law. This will have clear implications on the limits of profit distribution and management remuneration. Such a transformation would make it even clearer to everybody that speculation is not our goal. While we definitely need to generate returns, we want to achieve them based on ethical behaviour that is oriented towards the wellbeing of the community, our investors and our staff.”

Massimo Giusti, SEFEA Impact

You have been able to attract a very diverse and large pool of investors, including the Holy See and Intesa Sanpaolo Bank, just to name a few. What was the secret sauce in convincing them to invest in the fund? I imagine it was not the promise of double-digit returns.

First of all, it helped us to be very focused and have a shared conviction. We are unique in making impact investments in social cooperatives in Italy. Also, we invest in our region and don’t go around the world to make “strange” investments. We want to be deeply rooted here, with each investment that we make. Even the pension funds, who invested in SEFEA Impact, understood the innovative character of our strategy.

Our positioning and rootedness in the third sector and the impact world also helped us with the Bank of Italy who understood that we are well-intended and professional. This clarity was matched by simplicity: Our offer is the same for everyone. All investors have the same rights and obligations, irrespective of how much capital they subscribe for. We want to avoid complicated structures, different returns and fund layers.

Talking about pension funds: I was particularly impressed to see that you have pension and provident funds aboard, i.e. investors that are typically very risk-averse and difficult to convince.

Although we consider the ESG directive a step back, it provided us with a great marketing opportunity: From the beginning, we qualified under Article 9 of the Sustainability-Related Disclosures Directive 2019/2088. For some pension and insurance funds, it clearly helps to be able to say that they have some ESG funds in their portfolios. Nevertheless, it wasn’t always easy, and there have been cases when we have been ultimately rejected despite the enthusiasm of top-level executives. Part of it was due to the limited returns. With an expected return of 7% at the portfolio level, our offering is not speculative. We explained that this is the return we can realistically expect for this type of activity, and this clarity of intent was crucial. The message was: If they wanted a double-digit return, we would not be the right partner.

Knowing that we are a niche fund, we focused on investors who can use the fund to support their members or clients. For example, we have on board an insurance fund from the cooperative world. By investing in SEFEA Impact fund, they invest in their insurers, i.e. emerging and growing cooperatives. Same with the provident society of psychologists who can accept 2% lower returns from our fund (compared to their other investments), in exchange for more work for psychologists developed by the cooperatives that we support.

Have the efforts of creating a multi-stakeholder ownership provided any advantage in your fundraising?

Absolutely – the multi-stakeholder ownership of both the fund and the management company provided more warranties to the investors that our impact promise will be fulfilled, as there is no boss, no majority shareholder in the management company. I believe that if we had presented ourselves with EIF, Fondazione con il Sud and a few other banks, it would have been much less attractive. The regional network of investors adds great value to the attractiveness of the fund. In my view, the future lies in impact and sustainability. The question is how to organise it. We believe that only a multi-stakeholder approach can tap into the full potential of this market, integrating both regional and cultural diversity. With such a collaborative network of investors, we can confront large traditional asset managers and funds, who decide from one day to the next that they want to switch to impact, but without actually changing their culture. I look forward to seeing a network of such multi-stakeholder impact funds emerge across Europe.

In a nutshell: You purposefully design an entire ecosystem.

Absolutely. Such a multi-stakeholder network of investors in the fund brings an incredible wealth of knowledge, expertise, communities and networks, which is essential for the success of our fund. Our regionally focused network provides us with a package of information that is key for any investor and that you don’t find in financial statements or other forms of documentation. For instance, when we consider an investment in a workers’ buy-out, we are never alone. Our investor CFI (a private entity created by the three cooperative groups in Italy that invest in workers buyouts), provides us with economic guarantees, as well as their unique know-how in the field. There are similar examples in practically all our investment operations. These investments are never disconnected from each other, and we always try to connect them to create more commercial outlets. I’m aware that this could be seen as conflict of interest if analysed superficially, but in reality, it is a guarantee of success.


A social worker by training, Massimo Giusti built his career beautifully combining the impact and the finance worlds. Over the years, he has set up several social cooperatives and consortia, held senior positions in various Italian cooperative federations and fora. Since 2019, Massimo is the President and Managing Director of the only asset management company in Italy specialized in impact finance, SEFEA Impact SGR. At SEFEA, he leverages his experience in top-level positions in banking, listed companies, pension funds and the impact world to bring these actors together, make them work together to leverage their resources to make the world a better place.

More about SEFEA Impact:

Website (in Italian)

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