Threadneedle Investments is to launch what it claims is the first UK social bond fund with daily liquidity.
The Threadneedle UK Social Bond Fund will be launched in partnership with Big Issue Invest, the social investment arm of The Big Issue, and aims to achieve both an investment return and a positive social outcome by investing in fixed income securities of organisations which support socially beneficial activities and economic development.
Available to institutional and retail investors from January 2014, it will invest in companies, associations, charities and trusts in social intensity areas including affordable housing and property, community services, employment and training, financial inclusion, health and social care, transport and communications, and utilities and the environment.
The fund will launch with £10m of seed investment from Big Society Capital, the world’s first social investment bank and £5m from Threadneedle. The fund manager claims it is the first fund of its kind with daily liquidity, offering more investors access to the increasingly popular social investment space.
Threadneedle chief executive officer Campbell Fleming 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. We have worked with Big Issue Invest to develop a concept that allows them to access investments with a social benefit, through a transparent and liquid vehicle which also aims to generate a return in line with a UK corporate bond index.
“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.”
Big Issue Invest chief executive Nigel Kershaw added: “We have developed a unique social assessment methodology, with input from Threadneedle’s Governance and Responsible Investment team, enabling the fund manager to direct money into organisations that improve the lives of individuals, communities and society as a whole.”
The Fund has an Annual Management Charge (AMC) of 0.30% for both institutional and retail investors, and there is no performance fee. The AMC will be split between Threadneedle and Big Issue Invest, further supporting the work of Big Issue Invest and its parent The Big Issue in financing business solutions to social problems and tackling homelessness. Threadneedle will contribute a portion of its fee to the Threadneedle Foundation, a dedicated entity through which the company provides support for charitable activities.
Threadneedle said the fund will be managed by credit fund manager Simon Bond and will target an annual gross return in line with that of a UK corporate bond index such as the Merrill Lynch £ Non Gilt Index, which is currently generating a yield of circa 4% per annum.
In making investment decisions, Bond will be guided by the Social Assessment Methodology to determine suitable investments. The social outcome generated by the resulting portfolio will be monitored and verified by a Social Advisory Committee, made up of six members, including Big Issue invest’s Kershaw, Threadneedle head of governance and responsible investment Iain Richards and John Hale, former manager of investment affairs at the Association of British Insurers.
You can read more about social bonds here.
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