Investing into Microfinance Investment Funds
This paper investigates investment performance of selected microfinance investment funds (MIVs) in order to assess the attractiveness of microfinance for portfolio diversification.
The study analyzes risk characteristics and performance of selected MIVs against given equity and fixed income indices over a defined study period. It assesses the strength of the MIV sector by referring its attributes to global stock and fixed income markets as well as to alternative emerging market asset classes. The paper hypothesizes that if MIVs show no significant correlation with global, developed markets and emerging markets, then they would represent a valuable portfolio diversification opportunity.
The study finds that investment in MIVs that focus on debt instruments represents an attractive opportunity for portfolio diversification as they does not show any positive correlation with global or emerging capital markets. Findings indicate that MIVs offer:
- Lower total risk than global stocks and bonds with moderate, but stable returns;
- Social returns;
- Adequate risk-adjusted returns, and are attractive for social as well as commercial investors.