Threadneedle and Big Issue Invest join forces for UK Social Bond fund

Threadneedle Investments and Big Issue Invest have pulled the curtain on the Threadneedle UK Social Bond fund – an investment vehicle available from January 2014 that aims to balance financial returns with positive social outcomes.

Social investment bank Big Society Capital is to provide £10m of initial investment to help launch the fund, with Threadneedle, a leading investment house that manages assets of nearly £85 billion, contributing a further £5m.

Both retail and institutional investors will be able to invest at least £2,000 in the fund from early next year. Annual financial returns are currently expected to be around 4%.

The fund’s manager will make investment decisions based on a defined methodology, drawn up by Big Issue Invest – the Big Issue’s investment arm – and Threadneedle’s governance and responsible investment team.

It will look to invest in bonds issued by charities and other social organisations across eight areas: affordable housing and property, community services, employment and training, financial inclusion, health and social care, transport and communications, and utilities and the environment.

An advisory committee will monitor the social performance of all potential investments.

The launch of the fund comes at a time of huge appetite for socially-focused investments. A survey by the ethical bank Triodos during National Ethical Investment Week in October suggested as many as 3 million investors across the UK could consider social investment within the next year.

Surveying the investment habits of more than 4,000 people, Triodos said only 17% believed profit was more important than being ethical.

Campbell Fleming, chief executive officer of Threadneedle, said, “We are proud to be launching this landmark fund at a time of significant need and demand for social investments, not just from institutional investors but also from individuals.”

He added, “The UK government has been vocal on its plans to bring investment into public services through new financial initiatives. The UK Social Bond fund complements these efforts and is the first fund of its kind to bring social investment to mainstream UK investors.”

Meanwhile, Nigel Kershaw, chief executive of Big Issue Invest, said, “The Big Issue is committed to preventing poverty which can lead to people falling into homelessness. The UK Social Bond fund extends and supports this mission by investing in organisations that create social benefits and support more sustainable economic development and job creation in the UK.”

Nick O’Donohue, CEO of Big Society Capital, said the fund is the “first” liquid – convertible easily and quickly into cash – product with a reasonable yield that social investors can work into their ISAs.

Five of the leading organisations in the social investment market, including Big Society Capital, recently collaborated to launch the Social Investment Research Council, which will seek to maximise the benefits for socially-motivated investors by enhancing knowledge within the sector.

Further reading:

‘Research council’ formed by industry leaders to deepen social investment market

Finance that turns people’s lives around: social impact bonds

Cameron: ‘social investment can be a great force for social change on the planet’

Sir Ronald Cohen: measuring of social investment outcomes a ‘breakthrough’

Triodos survey says 3m may consider social investment in next year