We invest to achieve social, financial and market development returns.
We have some specific requirements linked to the sources of our capital. We work hard to adapt to proposals that fulfil our mission, while living up to our legal obligations.
- Intermediaries: We invest with intermediaries rather than directly. Find out more about who we invest in.
The dormant accounts act sets out our wholesaler role as investing to "assist or enable other bodies that give financial or other support to third sector organisations".
- Frontline Eligibility: We invest with intermediaires that provide financial or other support to charities and social enterprises.
Charities and social enterprises or "third sector organisations" are defined by the dormant accounts act as those that"exists wholly or mainly for the benefit of society or the environment".
In interpreting this we are aiming for the majority of our investment to benefit asset locked organisations, such as charities and CICs. In some strategic areas our capital will also benefit for-profit social enterprises, here we will ask for additional protections such as our Governance Principles.
- State Aid: We require you to be addressing an area of market failure and that you are able to demonstrate that you understand the State Aid implications of your investments.
- Political Neutrality: We require that your investment decisions are not influenced by party political considerations.
- Transparency: Transparency is one of our founding principles, part of our investment agreement with you will include transparency requests.
- Responsible Business Principles: We will also ask you to sign up to these and to undertake that your investees will also do so. These are not intended to be onerous, and cover basic behaviour that most businesses would consider standard practice, including fair treatment of employees and upholding high standards of integrity.
Requirements where we have some flexibility
- Size: We generally invest between £500,000 and £15 million.
- Structure: We can invest through a variety of structures, such as direct debt in an intermediary or pooled vehicles like limited partnerships. We have the ability to use other means such as underwriting or direct co-investments where we believe this is the most effective way of tackling market failure and addressing social issues.
- Term: We generally look to build in an exit to ensure we can recycle our capital in to new investments - most of our investments have been between 3-10 years long. We have made some perpetual investments, such as SASC's Community Investment Fund, where we believed it was the best way to build social value.
- Co-investment: We will look for at least 1x like-for-like match to each investment, though we aim for a higher overall match across our portfolio. In some cases we have considered short-term refinancing as a match - for example the Pure Leapfrog Bridge Loan which is bridging to community share issues. We have also relaxed our match policy where our board has highlighted a strategic priority - for example the need to seed more unsecured loan funds such as FSE's Social Impact Accelerator.
- Geography: We invest to grow social investment and the social sector in the UK.
- Governance: In many of our investments we represent a large proportion of total capital, and in those cases will request a role in the governance of the investment.
- Returns: We have a target IRR across our portfolio of 4-6%, though we have made investments with expected returns both below and above this range. We assess the financial return against likely risk, the social return, market development return, and its ability to attract the co-investors we require.
- Social impact: We prioritise interventions and organisations that improve the lives of the most vulnerable and disadvantaged people in the UK. We have invested in other impact areas where the investment contributes to our broader strategic objectives.