Charity Bond Support Fund | Big Society Capital

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Charity Bond Support Fund

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Rathbones

Backstop facility for new charity bond issues.

Social impact 

Charities and social enterprises in the UK have historically been precluded from issuing bonds – large transferable loans – given their scale, size of their funding needs and costs & complexity of issuance. This restricts their ability to access large amounts of capital necessary to grow their services and ultimately their impact.

The Charity Bond Support Fund is managed by Rathbones Investment Management and supports a range of charities and social enterprises delivering social impact to raise capital from investors via the public bond markets. The fund is designed to support issuers raise capital at a period when the market is still developing and a lack of a track record may be a barrier to issuers and investors considering charity bonds. The fund can invest in up to 1/3rd of an eligible charity bond issue as a backstop investor, acting as the ‘capstone’ to transactions. Eligibility is based upon based on the issuers’ legal form, beneficiary focus/public benefit, articulation of their social mission and commitment to providing impact reporting. The aim of the fund is to help give charities considering raising funds via a bond issue the confidence in the availability of capital and to attract new social investors into the area as the number of outstanding issues grow.

The Charity Bond Support Fund will be deemed most successful when its existence aids the initial engagement of a prospective issuer with the charity bond market. Ultimately the aim of the Charity Bond Support Fund is to use its capital to help develop a fully functioning market for charity bonds and increase the accessibility of bond finance for a large number of charities and social enterprises. Rathbones pass on any impact reporting received from issuers to Big Society Capital.

Financial rationale

Managed by Rathbones Investment Management, the Charity Bond Support Fund acts as a backstop facility to new charity bond issues and purchase up to one third of charity bonds which meet its eligibility and risk/return criteria. The Fund has been specifically structured to ensure it supports the development of the charity bond market as it grows and does not embed a reliance upon its support, encouraging and prioritising demand from other social investors.

Market development 

In the short term our investment is designed to increase the supply of Charity Bonds by increasing the confidence of a successful issuance outcome for charities considering their financing options. In the long-term, it is hoped the fund will help develop a broader track record of charity bond issuance and ultimately attract further investors into the Charity Bond market, either through individual and institutional investor participation in individual transactions or through the development of specialist charity bond-only products and mandates structured along the lines of this designated account.

Investment details

  • Total fund size: £30 million
  • Big Society Capital investment: £30 million
  • Co-investors are sought on a deal-by-deal basis at a minimum ratio of 2:1
Last updated | 
20 January 2016