The charity bond market is set to receive a boost following a commitment from Big Society Capital to help the market raise capital by encouraging both issuers and investors. A new £10 million fund, set to be managed by Rathbone Investment Management, will support this.
The Charity Bond Support Fund is designed to increase access to debt financing for charities, adding a scalable source of capital to existing sources. By increasing the number of finance option to the charity sector, it is hoped that this will be able to cost effectively meet its financing needs and invest in long term growth whilst increasing the impact of the organisations work.
Bryn Jones, head of fixed incomes at Rathbones, said, “We believe that this is fundamentally important in creating a functional market for charity bonds. Rathbones was the first institutional investor to invest into UK charity bonds having supported the Scope issue in 2012, and we have since invested in a number of issues that have come to market from social sector organisations.”
The fund will purchase up to a third of eligible charity bonds and act as a backstop to appropriately priced primary market issuance. It will build up a portfolio of charity bonds.
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Charity or social enterprise bonds act in the same way as a traditional bond, paying back the amount loaned, with regular interest payments, over a defined period of time. However, the payments can also linked to the performance of the organisation and its ability to deliver social improvements.
Chief executive of Big Society Capital, Nick O’Donohoe commented, “In recent months we have seen a transformation in the charity bond market, with increased interest from both charities and investors, as well as important infrastructure developments.
“Charity bonds have the potential to open up the social investment market, and we hope that this fund will provide the support needed to enable charities to see investment in this way.”
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