Allia opens up social impact bond market to individuals

Allia opens up social impact bond market to individuals

News (UK)

Social investor Allia this week launched the first social impact bond (SIB) offering to retail investors.  The SIB for Essex County Council aims to improve the life outcomes of 380 children aged 11-16 at risk of going into care.

The eight-year Future for Children Bond aims to raise £1m from individuals and offers a minimum return of 100% to retail investors with £15,000 or more to invest. Allia will use 78% of this as a loan to affordable housing provider Place for People Homes, which has a Moody’s credit rating of Aa. This will return the original investment. The remaining 20%, after a 2% management fee, is invested in Essex County Council’s SIB.

Managed by Social Finance, the SIB will fund a programme of multi-systemic therapy, an intensive family and community-based approach, delivered by Action for Children. It will provide intensive support to approximately 380 children and their families and aims to divert around 100 young people from entering care by providing support to them in their home. The success of the social impact bond will be measured by the reduction in days spent in care by these children. It costs the council £180,000 per year to look after a child in residential care. Successful multi-systemic therapy can therefore make substantial savings to the council as well as improving school outcomes, wellbeing and reducing re-offending amongst young people. Cost savings will be used to provide a return to investors although Allia have not provided additional figures.

Phil Caroe, chief operating officer of Allia, said: “The model, developed by Social Finance, is a new and innovative approach to achieving better outcomes for children at risk of entering care and so must be considered a high risk investment in order to achieve a high social impact. Allia is therefore unable to provide any expectation of what the return from this investment in the SIB might be. The purpose of the ‘capital plus’ structure for the Future for Children Bond however is to enable investors to participate in this SIB model while keeping their principal at very low risk; and whatever payments are received from the SIB will give them an additional return above principal.”

The SIB already has commitments of £3.1m from institutional investors and therefore will go ahead regardless of uptake by the public. However, existing institutional investors are collectively willing to scale back their investment by up to £1m to enable the pioneering new retail investment opportunity.

Applications, which close on March 15th, for more than £50,000 will only be allowed if the offer is not fully subscribed. All applications must be completed by a financial advisor.

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