A new method to make low risk-investments in social impact bonds will be launched in January by Allia, a not-for-profit organisation that specialises in bond funding for the third sector.
Investors who buy the Future for Children Bond will have about 80 per cent of their investments put into loans to housing associations. These have a very low chance of defaulting and will, if it repaid, allow the investor to break even over the eight-year course of the bond.
The remainder will be put into social impact bonds that fund work with children at risk of being put into care in Essex. This was announced last week by Francis Maude, the Cabinet Office minister.
The bond will be open for investments of more than £25,000, and Allia hopes to raise £1m in total.
Phil Caroe, chief operating officer at Allia, said the scheme offered investors a relatively low-risk method of putting money into social impact bonds.
"This is about taking a high risk on your growth but a low risk on your capital," he said.