Investment trust aims to plough £500m into impact funds after securing first fundraising

News21 Jan 2021Gavriel Hollander

An investment trust aimed at social impact investing, including in social and affordable housing, has said it is looking to grow to £500m over five years after raising its first £75m through an initial public offering (IPO) late last year.

The trust went to market late last year (picture: Getty)

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Investment trust aims to plough £500m into impact funds after securing first fundraising #UKhousing #SocialHousingFinance #ESG #ImpInv

An investment trust aimed at social impact investing, including in social and affordable housing, has said it is looking to grow to £500m over five years after raising its first £75m through initial public offering #UKhousing #SocialHousingFinance

The Schroder BSC Social Impact Investment Trust, a company that will be managed by Big Society Capital (BSC) and fund manager Schroders, went to market for its first fund raise late last year, with the £75m including £58m in partly deployed seed funding from BSC’s own balance sheet.

The company will commit money to a portfolio of ‘impact’ funds initially in three areas: high-impact housing, including social housing and housing for specialist or vulnerable groups; debt for social enterprises; and social outcomes contracts.

On the housing side, it will particularly look to invest in funds specialising in transition accommodation for people exiting homelessness or fleeing domestic violence, as well as housing for low-income renters currently living in poor-quality or insecure accommodation.

The trust is targeting a return on investment of around Consumer Price Index plus 2%, with investors including Cazenove Capital, which has come on board as a cornerstone investor, alongside wealth managers, pension funds, family offices and high net worth individuals.

The initial investment portfolio acquired by the company includes has a valuation of £39.2m plus £19.9m in undrawn commitments. The portfolio includes housing-related funds, such as the Resonance Real Lettings Property Fund, launched in 2013 alongside homelessness charity St Mungo’s, CBRE’s UK Affordable Housing Fund, and Social and Sustainable Capital’s (SASC) housing fund, both of which launched in May 2019.

In total, the trust’s investment in these funds is valued at £10.9m, with an additional £9.7m in undrawn commitments. Rathbones Charity Bond portfolio was the biggest beneficiary of the initial investment, with £15.1m invested.

Speaking to Social Housing, Jeremy Rogers, chief investment officer at BSC, said that the demand from investors for access to the types of funds included in the trust’s portfolio of investments was “in the billions”.

Mr Rogers said: “There’s clearly a lot of equity investments into housing that are private institutional investors – very large pension funds or large institutions – that are investing through the likes of Cheyne, CBRE or so on.

“But there’s a whole group of investors who can’t access those private markets but want to invest in this space nevertheless, and the demand for that in is in the billions clearly when you think about the conversations that we’ve been having and the types of people involved.”

Mr Rogers said the trust was open for investors that wanted to place anything between £1m and £5m, and that he expected it to go to the market to raise money “fairly regularly”, including a raise later this year. He said the target was to reach a size of £500m in five years’ time, although this would likely happen “in waves rather than a straight line”.

He said that there was already a pipeline to place all the money raised in the IPO as well as the next fundraising. “We will keep going out and finding best-in-class funds and this is a really easy way for people to access them,” he added.

The trust will provide an inflation-linked alternative for investors to social housing providers’ own-name bonds, which are currently being issued at historically low prices, often at under 2%.

“The real challenge for investors currently with investing in a 20-year social housing bond is that with them at 1% or 2%, if inflation comes back that becomes a pretty challenging investment for people,” Mr Rogers said.

In its investment policy statement, the trust said it would generally hold only minority interests in impact funds but would consider taking a majority interest where appropriate, for instance as a cornerstone investor alongside the portfolio manager.

The trust is the latest investment in the housing space for global asset-manager Schroders, which in 2019 established a five-year fund with Civitas Investment Management aimed at forward funding the development of specialised supported housing schemes. The Social Supported Housing Fund doubled in size to £100m in September after raising £50m from investors in a second close.