£15m social bond fund launched in the UK by Threadneedle Investments

Threadneedle Investments, the UK fund manager with £84.9bn (€101.7bn) in assets under management, is teaming up with Big Issue Invest, the social investment arm of homeless publication the Big Issue to launch a social bond fund in the UK in a sign the sector is gaining “mainstream” traction.

The fund – available to institutional and retail investors from January 2014 – aims to achieve both an investment return and a positive social outcome.

It will be managed by Threadneedle Credit Fund Manager Simon Bond and will launch with £10m of seed investment from social investment bank Big Society Capital and £5m from Threadneedle itself.

Investments will be assessed by a ‘Social Advisory Committee’. This will comprise: Nigel Kershaw, Chief Executive of Big Issue Invest and Chairman of the Big Issue; Sarah Forster, Deputy CEO, Big Issue Invest; Mark Hepworth, Head of Research and Policy, Big Issue Invest; Iain Richards, Head of Governance and Responsible Investment, Threadneedle; Simon Bond, Credit Fund Manager, Threadneedle; John Hale, former Manager of Investment Affairs at the Association of British Insurers.

The fund will invest in fixed income securities of organisations which support socially beneficial activities and economic development.These could be companies, associations, charities and trusts in the areas of affordable housing, community services, employment and training, financial inclusion, health and social care, transport and communications, and utilities and the environment.

Threadneedle said the fund would be a “transparent and liquid” vehicle benchmarked against a UK corporate bond index.

The minimum investment is £2,000 when accessed via UK platforms; there’s an annual management charge of 0.30% for both retail and institutional investors, and there is no performance fee. The charge will be split between Threadneedle and Big Issue Invest. Threadneedle will contribute a portion of its fee to its charitable foundation.

Nick O’Donohoe, the former JPMorgan global research chief who heads Big Society Capital, said: “Since our launch we have repeatedly heard that individuals who are attracted to social investment want products that are liquid, can provide a reasonable yield, and which can work within their ISAs [individual savings accounts].”

Big Society Capital partnered with Bridges Ventures earlier this year on the £14m Social Impact Bond Fund, which invests in charities and social enterprises.