The launch of the Allia “Future for Children” Bond is a big step in the Social Impact Bond (SIB) market, marking, the first opportunity for retail investors to invest in a Social Impact Bond. Whether £15,000 qualifies as a “retail” product is almost a moot point, since up until now SIBs have only been open to qualifying investors such as Trusts and Foundations and High-Net Worth Individuals.
To move the social investment market to the next level, we need to bring in the retail investors. And to do that, we must develop the financial products that allow retail investors to take part. This is exactly why we developed the Social Impact VCT which has now opened for subscriptions and why we are excited by Allia’s launch.
Back to the bond in more detail: as you might remember, Social Finance was awarded a contract by Essex County Council back in November to deliver a Social Impact Bond for vulnerable adolescents on the edge of care. We raised £3.1 million to fund an intervention called Multi-Systemic Therapy that will provide intensive family therapy and support for children on the edge of care and their families. The goal is to keep the children safely in their homes and out of care, and improve their life chances in education, employment and well-being.
Allia hopes to raise £1 million. 78% of the money will be loaned to a double A rated housing provider. The repayment of this loan plus compound interest will equal the original investment meaning that investors will get their money back. 20% of the money will be invested in the Essex County Council Social Impact Bond. As Social Finance has already raised commitments of £3.1m, some of the existing investors are considering transferring part of their investment to support the expansion of the investor base into social investment. The remaining 2% will cover Allia’s administrative costs.
Steve Goldberg, a SIB consultant in the US has described the Allia bond as exemplifying financial innovation for social good at its best.
“By designing the Future for Children Bond as a retail investment product, Allia is opening a completely new frontier for social investment. If things go as planned, someday investments like this will become something that virtually anyone can invest in as part of your regular portfolio or your retirement account at work.”
His full article goes into much more detail about the product and his thoughts on the future of the retail social investment market.
Allia have also produced a fantastic infographic on the state of the Social Investment market in the UK (clue, it’s looking healthy!). It is one of the best overviews I’ve seen to date and I recommend you check out this, and further coverage of the Bond on Allia’s website.
By Alisa Helbitz, Director at Social Finance