Patient capital
Patient capital is another name for long term capital. With patient capital, the investor is willing to make a financial investment in a business with no expectation of turning a quick profit. Instead, the investor is willing to forgo an immediate return in anticipation of more substantial returns down the road. Prominent examples of patient capital includes pensions, sovereign wealth funds, and university endowments.[1] Governments with access to patient capital may have greater maneuverability in formulating domestic economic policies.[2]
Although patient capital can be considered a traditional investment instrument, it has gained new life with the rise in environmentally and socially responsible enterprises. In these cases, it may take the form of equity, debt, loan guarantees or other financial instruments, and is characterized by:
- Willingness to forgo maximum financial returns for social impact, and an unwillingness to sacrifice the interests of the end customer for the sake of shareholders
- Greater tolerance for risk than traditional investment capital
- Longer time horizons for return of capital
- Intensive support of management as they grow their enterprise
The success of the platform company business model is in large part due to patient capital, as investors are prepared to accept long periods without profit in the hopes that the platform company obtains a dominant market position.[5]
Notes
- ISBN 978-0-691-21708-6.
- ISBN 978-1-107-18231-8.
- ^ Friedman, Thomas L. (2007-04-20). "Patient Capital for an Africa That Can't Wait". The New York Times. Retrieved 2007-04-20.
- ^ Novogratz, Jacqueline (June 2009), A third way to think about aid, TED, retrieved December 18, 2017
- S2CID 159239875.