Avenue Capital to launch 'impact' investment fund, source says

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(Reuters) - Avenue Capital Group LLC, a New York-based investment firm with $9.4 billion in assets under management, plans to launch a fund this year that will focus on so-called impact credit investments, according to a person familiar with the matter.

The Avenue fund will primarily make debt investments, along with some equity, in North American companies, the source said. That could include businesses that aspire to have a social or environmental impact in sectors like agriculture, water, renewable energy, energy efficiency and storage, affordable housing and infrastructure resiliency, the source added.

Avenue, led by billionaire Marc Lasry and best known for its bets on distressed debt, is seeking to raise about $500 million for the new fund, said the source, who requested anonymity because the information is confidential.

A spokesman for Avenue declined to comment.

The new fund, Avenue's first foray into the sector, will be run by John Larkin, a senior managing director who is now head of impact investments, the source said. Two recently hired deputies, Rhys Marsh from CIT Group Inc CIT.N and Thomas "Jamie" Devine from J.H. Whitney Investment Management LLC, will assist him, according to the source.

Such impact funds are few and far between in the world of alternative investments, especially hedge funds, though investor demand for them is rising. Recent entrants include activist hedge fund JANA Partners LLC and ValueAct Capital Management LP.

The Avenue fund’s credit focus would be a rarity as most investment vehicles driven by environmental, social and governance criteria focus on equity bets, often through publicly traded stocks.

Like other Avenue funds, the new “impact” fund will require investors to commit capital for multiple years, a so-called lockup structure that is something between a hedge fund and a private equity fund, according to the source.

Reporting by Lawrence Delevingne in New York; Editing by Jeffrey Benkoe