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ImpactAssets 50: A Global Landscape of Impact Investment Fund Managers
The ImpactAssets 50 (IA 50) is the first open-source, publicly published database of experienced private debt and equity impact investment fund managers.
http://www.impactassets.org/impactassets-50

ImpactAssets 50

An Annual Showcase of Impact Investment Fund Managers

HCAP Partners

Total Assets Under Management: $100 – 249MM
Asset Class: Private Debt - Absolute Return / Notes, Private Equity
Geographic Focus:
Impact Investment Focus:
Health and Wellness
Fair Trade
Water and Sanitation
Media, Technology and Mobile
Sustainable Agriculture
Microfinance/Low-Income Financial Services/Micro-insurance

Firm Overview

HCAP Partners is a provider of growth capital to lower-middle market companies throughout California and the Western United States. The firm, formerly named Huntington Capital, was founded in 2000 and is based in San Diego, CA. Established with a vision to stimulate the economic well-being of underserved communities while seeking to generate above-market rate returns, HCAP Partners has been recognized as a leader in the emerging area of private debt and equity "impact" funds. HCAP Partners is known for its expertise in deal origination, deal structuring and assisting companies to enhance performance in the areas of financial results and work/life quality. It is a partner of choice for companies and private equity firms seeking mezzanine capital for growth, acquisitions, and other strategic initiatives.

Firm Headquarters: US & Canada
Years of Operation: More than 10 years
Total Assets Under Management:
$100 – 249MM
Total Number of Investors: More than 25
% of Capital from Top 3 Investors: Less than 25%
Investment Thesis:

The Fund primarily provides growth capital, structured as Mezzanine Debt and/or Preferred Equity, to small businesses the key drivers of employment creation across the U.S. Our mission is to provide lower-middle market growth companies with the capital and value-added resources to help optimize company performance, increase enterprise value, and provide above market returns to our limited partners while having a positive impact in the communities in which we invest and working with management to create good quality jobs, while limiting risk through disciplined underwriting and structured investment terms. The Fund's investment thesis was developed as a result of the background of the team in building a firm that would not only provide access to capital to underserved companies, but also provide good quality jobs with employee benefits through its portfolio companies for LMI employees and create jobs in underserved communities, thereby supporting a diverse workforce of LMI individuals and families.

Investment Example

HCAP Partners recently provided growth capital to Noribachi, a Harbor City, California-based LED light manufacturer for high output commercial and industrial applications. As of June 30, 2015 Noribachi employed 75 employees, the majority of who are part of the manufacturing labor force and reside in low-to-moderate income areas and earn LMI wages. As part of its focus on broad-based wealth creation, all company employees are part of the stock option plan. Manufacturing and lower level employees get 5,000 to 10,000 shares with a 5 year vesting schedule. Noribachi also provides opportunities for advancement across the entire workforce. A great example is Ileana McDonald, the current Production Manager. Ileana started out as an assembly floor worker in 2012 and rose through the ranks to head a 54-member production team. In addition, Noribachi encourages employees to try different departments in which they feel they may be a better fit.

Leadership and Team

Cumulative Leadership Experience in Investing:
More than 30 years
Cumulative Impact Experience of Top Three Firm Leaders:
20 – 30 years
Morgan Miller – Managing Partner More Info

Morgan Miller is a co-founder of HCAP Partners and has served as a Managing Partner since the firm’s founding in 2000. Over the past 25 years he has worked in mezzanine lending, equity investing, international banking and capital markets,financial management, strategic planning, finding solutions to troubled assets and has served on boards of various growing companies. His positions include senior vice president and regional manager for Rancho Santa Fe National Bank, and senior vice president responsible for strategic planning for Great American Bank, a $15 billion savings bank. He also worked for 10 years in international banking where he was Senior Credit and Marketing Officer responsible for all lending for Bank of America operations in Puerto Rico and the U.S. Virgin Islands. Miller has extensive workout experience and has been responsible for restructuring over $200 million in problem loans. He has been a consultant to various businesses in southern California including serving as CFO for a wireless technology company and a direct marketing life insurance company.

Tim Bubnack – Managing Partner More Info

Tim Bubnack joined HCAP Partners in June 2007 and has more than 17 years of lending, technology investment and financial experience. Prior to joining HCAP, Tim spent five years with Silicon Valley Bank as Managing Director of commercial banking activities in the San Diego region where he managed early stage and middle market banking relationships in the technology, communications and biomedical industries. Prior to joining Silicon Valley Bank in 2002, he served in senior executive positions at Comerica Ventures, Inc. and Comerica Capital Advisors where he was responsible for identifying and assessing direct equity investments and investments in venture funds. Tim also made loans in partnership with the Technology and Life Science Division of Comerica Bank. At Comerica Bank he was part of the founding team of the company's Southern California Emerging Growth Division.

Frank Mora – Principal More Info

Frank joined HCAP Partners in February 2013, and is responsible for originating, structuring, closing and monitoring portfolio investments. Prior to joining HCAP Partners, Frank was with DBI Capital, a Southern California based lower middle market private equity buyout group. Frank joined DBI in 2006 where he was responsible for sourcing and structuring investment transactions, including co-investments into two Huntington portfolio companies. Before joining DBI, Frank was a Vice President in the Fixed Income Capital Markets team at Citigroup specializing in Private Placements. Prior to joining Citigroup, he was an officer in the Venture Capital team within the Economic Development Bank for Puerto Rico.

Hope Mago – Senior Associate More Info

Hope joined HCAP Partners in May 2009. Hope participates in the origination and analysis of new investment opportunities, investment due diligence, deal underwriting, and investment monitoring. Prior to joining HCAP Partners, Hope worked as an Analyst at the Reserve Bank of Zimbabwe where he was involved in economic policy formulation, lending due diligence for export ventures receiving funding through the Export Support Facility under the Exchange Control Division. Before that he spent a year interning at First Mutual Limited, the second-largest life insurance and money manager in Zimbabwe.

Nicolas Lopez – Senior Associate More Info

Nicolas joined HCAP Partners in June 2013, and is responsible for originating, structuring, closing and monitoring portfolio investments. Prior to joining HCAP Partners, Nicolas was with Best Buy, Inc. in their corporate development group. Nicolas joined Best Buy in 2010 where he helped identify, evaluate and support early stage investment opportunities. He was also very involved with strategic initiatives at Best Buy, working with various cross-functional business groups to drive shareholder value. Before joining Best Buy, Nicolas worked in investment banking and investment management.

Percentage of Investment Professionals who are Women and/or Under-Represented Groups in Firm's Geographic Focus:
More than 50%
Percentage of Board Members who are Women and/or Under-Represented Groups in Firm's Geographic Focus:
More than 50%

Financial Performance

Target Financial Returns Relative to Benchmark:
Above Market Rates
Actual Performance Relative to Target Financial Returns in the Past Three Years:
In line with initial target returns
Financial Reporting Frequency to Investors or Donors
Quarterly

Impact Performance

Percentage of Total Assets Under
Management that are Impact Investments:
75% – 99%
Target Impact Outcomes:
Addressing climate change and environmental issues
Alleviating poverty
Conserving land, ecosystems and natural resources
Creating jobs
Increasing access to education and improving educational outcomes
Increasing access to financial services
Increasing access to healthcare services and improving health
Increasing access to water and sanitation
Promoting arts and media
Providing housing
Value-added Services Offered:
Access to markets
Business and legal training
Financial literacy training
Technology training
Health services
Education services

Investments systematically target companies where social and/or environmental impact is integral to the product/service being created:

The Fund screens all investments for any impact that is integral to the product or service the company offers. For example, Advanced Structural Alloys, a Fund II portfolio company, makes CNG cylinders for school buses, haulage trucks, and waste trucks. This investment ties in with our focus on clean technology and investments that have a focus on emissions reductions. We are also working on a transaction with a firm in the solar space which again is tied in with our focus on reducing emissions by moving people to alternative cleaner sources of energy. Our diligence process includes a survey from HCAP Partners that a portfolio company must submit during the diligence process. In addition, the Fund works with GIIRS to screen prospects in diligence for impact. The surveys are sent out early in the diligence process and form part of the decision early on whether to proceed as we evaluate a prospect opportunity.

Investments systematically include social and environmental sustainability practices in the due diligence process:

HCAP Partners Impact Investment Themes focus on small business financing and the creation/retention of good quality low-to-moderate income level jobs that pay a living wage with employee benefits. As part of our deal sourcing and due diligence process we consider the following:

  • Does the Company provide for upward career mobility for LMI employees and previously excluded populations;
  • Does the Company focus on workforce diversity including ethnic minorities/women-owned businesses/previously excluded populations;
  • Does the Company provide employees with broad-based wealth creation mechanisms including retirement savings plans, stock option schemes, bonus plans, 401K's and the quality of workforce earnings;
  • Does the Company provide its employees with financial literacy classes including budgeting, managing debt, credit card debt counseling. For example, when looking at the Ironridge investment we carried out diligence on workforce diversity and broad-based wealth creation mechanisms at the Company.
We also diligence opportunities for advancement including provision of training opportunities.

Impact Tracking and Monitoring

Impact is Tracked:
Yes
Social and/or Environmental Impact is Reported to Investors and Donors:
Yes - on regular basis (annual or quarterly)
Third Party Validations:
Participant on steering committees or leadership roles within impact industry associations
Publisher or contributor to industry white paper or other research in impact investing
Industry Impact Metric Tools Used:
Impact Reporting and Investment Standards (IRIS)
Other: Pacific Community Ventures/CalPERS proprietary ser

Learn More

Key Contact Name: Bhairvee Shavdia
Phone: (858) 259-7654
Mailing Address:

3636 Nobel Drive, Suite 401, San Diego, CA 92122

Ready for the next step?

Impact investments are investments made into organizations and funds that generate measurable social and environmental impact as well as financial returns.