Future for Children Bond
First public offer to invest in a social impact bond: Allia opens up social impact bond market to individual retail investors
The first public opportunity to invest in a social impact bond is being launched, giving retail investors a unique opportunity to invest in making a positive social impact that will repay capital plus a variable return according to success.
Offered by Allia, a charitable social investment organisation, the Future for Children Bond will invest into the social impact bond (SIB) for Essex County Council to improve the life outcomes of children aged 11–16 at risk of going into care.
Facts about the Future for Children Bond
- Minimum return to investors will be 100% of funds invested.
- Any payments from the social impact bond element will provide investors with an additional return on maturity.
- The term of the bond is 8 years.
- The bond has a minimum investment of £15,000.
- £1m of bonds offered.
- The offer period opens on 4 February and closes 15 March 2013 (or before if fully subscribed).
- Any amounts applied for in excess of £50,000 will only be considered if the offer is not fully subscribed.
- Advised product – applications must be completed by a financial advisor.
- The Essex SIB will proceed regardless of funds raised from retail investors via Allia’s Future for Children Bond.
The development of this ‘capital plus’ bond has been supported by Big Lottery Fund. It combines a low-risk ethical investment into affordable housing (Places for People Homes) to provide the funds to repay capital to investors, with a high-risk investment into the social impact bond with the aim of delivering a high social impact and providing an additional variable return.
|Places for People Homes (affordable housing)||Essex County Council’s social impact bond||Allia|
|How funds are used||Fixed rate loan||Combination of equity and loans||Management fees|
|Allocation of funds as % of total subscribed||78%||20%||2%|
|Returns on maturity as % of total subscribed||100% (fixed return based upon Moody’s Aa credit rating)||Depends on success of the programme. A return is not guaranteed.|
Places for People Homes
Of every £1,000 invested in the Future for Children Bond, £780 will be loaned to Places for People Homes, a Moody’s Aa rated housing provider that builds, sells and rents homes and provides services and support to those who live in them. The repayment of this loan plus compound interest will equal £1,000, enabling Allia to give investors back the amount they originally invested.
Essex County Council’s social impact bond
After Allia’s costs, the remaining £200 will be invested in the social impact bond (SIB) for Essex County Council, developed by Social Finance Limited and announced in November last year. The SIB has already raised capital commitments of £3.1m from a range of institutional investors, including cornerstone investors Big Society Capital and Bridges Ventures as well as charitable foundations including the Esmée Fairbairn Foundation. New retail investment will be accommodated by scaling back some of these existing institutional investors, who have indicated interest in supporting the expansion of the investor base for social investment. Therefore, because the full amount has already been raised, the Essex SIB will proceed regardless of the whether the full target of £1m is raised in Allia’s Future for Children Bond.
The Essex SIB will fund a programme of Multi-Systemic Therapy which will provide intensive support to approximately 380 children and their families. The target is to divert around 100 young people from entering care by providing support to them in their home. The success of the SIB will be measured by the reduction in days spent in care by these children, as well as improved school outcomes, wellbeing and reduced reoffending.
If the programme is successful in reducing the amount of time children need to spend in care, it will result in cost savings for Essex County Council, which can be used to provide a return to the investors in the SIB. Data on the number of care placement days for children in the programme will be tracked on a monthly basis and investors in the Future for Children Bond will be updated annually on the payments received.
The level of return on the funds invested by Allia in the SIB will depend entirely on the success of the programme. Any payments received by Allia will be rolled up and paid to holders of the Future for Children Bond on maturity.
Fourteen social impact bonds are currently live or in development in the UK – the first was in 2010 for Peterborough Prison by Social Finance – but today’s launch of the Future for Children Bond presents the first offer for public investment.
Tim Jones, Chief Executive, Allia said:
“We’re seeing growing interest amongst investors in using their investment funds to achieve a social impact as well as providing a financial return. Our capital plus bond gives the first public opportunity for individual investors to take part in this kind of innovative high-risk high-impact model.
“With the Future for Children Bond, investors can help give a better future to some of society’s most vulnerable young people, with the potential for sharing in the financial benefits while also keeping their capital at very low risk.”
David Hutchison, CEO, Social Finance said:
“We are keen to expand the investor base into the Social Impact Bond market and are delighted to partner with Allia to offer this investment opportunity to retail investors through the Future for Children Bond.
“Allia has a strong track record in developing investment products to raise finance for social benefit. We feel this launch is a particularly innovative way of allowing individuals the opportunity to invest in a social impact bond whilst having confidence that they’ll get their capital back.”
The Future for Children Bond opens on the 4 February for investment and closes on 15 March 2013 or earlier if fully subscribed.
For terms and more information please go to dev.allia.org.uk/futureforchildren