KeyStone Compact Group Investment Typology Assessment Tools Central to Design of Multi-Asset Funds for Industrial Renewal

Financial innovation project at Research Institute of Finnish Economy leads to new investment vehicles to connect pension funds with regional economic development

Nov 18, 2014, 06:00 ET from The KeyStone Compact Group

HELSINKI and ANN ARBOR, Mich., Nov. 18, 2014 /PRNewswire/ -- In a climate of slow economic growth and increased pressures for industrial renewal, global policymakers are seeking financial innovation to engage large funds in economic development. This comes at a time when pension funds are also looking at new high-performance alternative asset vehicles. However, the risk/return profiles of institutional investors often prevent them from investing in startups and small to medium enterprises (SMEs). To bridge these gaps, the Research Institute of the Finnish Economy (ETLA) is designing a multi-asset investment vehicle that leverages corporate enterprises with innovative SMEs. The effort utilizes the suite of KeyStone Compact multivariate typology assessment tools to evaluate the investability of companies. By combining yes/no questions with complex algorithms, the KeyStone technology tools categorize companies for equity-, non-equity-, and non-dilutive debt financing. Over 80 Finnish companies have been screened to date. Strong candidates for investment are bundled in the debt or equity assets of the Industrial Renewal Fund, featuring three distinct portfolios focused on emergent industries such as smart grid, e-mobility, and bio-based chemistries.

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"Providing over 60% of jobs, SMEs and disruptive startups are the backbone of any economy. With the majority of SMEs being 'happy non-takers' of equity finance, the key is to blend leveraged debt with equity investment, and inject that capital into these innovators," said Peter Adriaens, Co-Founder and CEO of the KeyStone Compact Group, a global business strategy and analytics firm. "Our tools provide a snapshot of the investability of a company's business model, including the type of capital that best matches the expected investment returns."

The KeyStone Compact suite of assays evaluates companies across the business lifecycle, from start ups and SMEs, to global enterprises. It separates a company's positioning for value capture in its industry, and its investability, the two-part, online method. Tested for over a decade, the investment evaluation criteria does not require company financial data or proprietary information to make an assessment.

In a first country-wide application, Finland's ETLA is utilizing the KeyStone Compact tools, to identify investable companies and design three portfolios of Multi-Asset Industrial Renewal fund for the region. The fund comprises a thematic equities index, fixed income (green bonds) and novel growth and risk-debt instruments, with return/risk profiles attractive to institutional investors.

"The vision of our project is to drive economic growth by addressing the investment needs of nationally-relevant megatrend sectors. At the same time, the objective is to design new investment vehicles to enhance the returns of large investors, such as pension funds, on whom the public relies on in retirement," said Antti-Jussi Tahvanainen, Chief Research Scientist at ETLA.

Over the past 10 years, the KeyStone Compact method has been rigorously tested using 100's of early and later stage companies by researchers at The University of Michigan's Ross School of Business, and over 600 cleantech companies as a part of the Global CleanTech Cluster Association Later Stage Awards. Currently, the tools are also in use at Sustainable Energy Association of Singapore, Cleantech Scandinavia and the Wolverine Venture Fund

The ETLA research is funded by Tekes through the Finnish Distinguished Professor Program.

About The KeyStone Compact Group

The KeyStone Compact Group is a global strategy and investment-level business analytics company. Serving clients in the Americas, Europe, Asia-Pacific and Middle East, our models assess and position private and public equities for value capture and investment across the business lifecycle. Using proprietary portfolio analytics, the KeyStone Compact Group designs thematic indices and portfolios comprised of blended capital assets to scale investment in industrial renewal, in collaboration with economic development groups, management consultants, institutional investors, and financial research institutes.

About ETLA

ETLA, the Research Institute of the Finnish Economy, is the leading private economic research organization in Finland. Established in 1946, ETLA has throughout its existence been quick to apply new methods and approaches to shed light on current economic issues, including factors that foster innovation and facilitate adoption of new technology, and thereby promote the development of a knowledge economy. Currently ETLA employs some 30 researchers in its four research programs and a forecasting unit. The research programs are engaged in labour market and education economics research, competition, innovation and productivity research, public finance and economic policy research, and economic growth, structures and business cycle research.

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SOURCE The KeyStone Compact Group