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View the article online at http://citywire.co.uk/wealth-manager/article/a655548

Allia unveils first ‘social impact’ bond

by Emma Dunkley on Feb 04, 2013 at 07:01

Allia unveils first ‘social impact’ bond

The charitable social investment firm Allia has launched a social impact bond that provides money to help improve the lives of children who are at risk of going into care.

The Future for Children Bond, which is the first public opportunity to invest in a social impact bond, will see the money go to Essex Country Council to help children aged 11-16.

The bond will repay capital at the end of the eight-year term and a variable return will be offered dependent on the success of the bond.

The development of this ‘capital plus’ bond combines investment into affordable housing – Places for People Homes – to provide the funds to repay capital to investors, along with investment into the social impact bond,  in order to deliver a high social impact and provide the additional, viable return.

Around 80% of the funds will go into the fixed rate loan for housing, while 20% will be allocated as equity and loans to Essex Country Council.

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.’

The bond has a minimum investment of £15,000 and is on offer from 4 February to 15 March.

2 comments so far. Why not have your say?

Sam De Zoysa

Feb 04, 2013 at 08:23

I find SIBs a fascintating concept but I think that that the deal should be sweetened to EIS or SEIS levels. 8 years is a hell of a long time to tie up the capital with the potential of a total loss. Unless ROC is guaranteed?

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Anonymous 1 needed this 'off the record'

Feb 04, 2013 at 11:57

This is not advice.

ROC is not guaranteed. Look at the offer documents for full details - but 78% of the money is used (implicitly) to provide the repayment of principal at maturity. This repayment is subject to the credit risk of Places for People. Allia says that the are Moody's Aa3. Looking at where their retail bond trades (http://www.londonstockexchange.com/exchange/prices-and-markets/retail-bonds/company-summary.html?fourWayKey=XS0635014177GBGBPUKCP) this translates into a credit risk premium of around 1.7% p.a. if I get my calculations right.

But in terms of evaluating this investment you need to look not just at the economics, but ask yourself what the social impact is worth to you.

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