A fund to buy bonds issued by charities and other social organisations has been set up with £15m by the investment house Threadneedle Investments, in partnership with Big Issue Invest, the social investment arm of The Big Issue.
The UK social bond fund has received £10m of seed investment from Big Society Capital and another £5m from Threadneedle itself.
Threadneedle said it was looking to attract a level of investment "in line with typical corporate bond funds" – which is believed to be between £50m and £70m in the first year.
The fund will raise money from a mixture of large institutional investors and smaller individual investors, which can put in a minimum of £2,000. It will be open to investment from January and will invest in bonds issued by charities, social enterprises and businesses with a social purpose.
It will invest in eight areas: affordable housing and property, community services, employment and training, financial inclusion, health and social care, transport and communications, utilities and the environment.
It is hoped the fund will offer a financial return to investors similar to that of an index of corporate bonds, and will offer "daily liquidity", meaning investors can quickly withdraw their money.
It will use a "social assessment methodology", developed by Big Issue Invest, in order to ensure it is generating sufficient social return.
Campbell Fleming, chief executive of Threadneedle Investments, said: "We are proud to be launching this landmark fund at a time of significant need and demand for social investments, not just from institutional investors but also from individuals. We have worked with Big Issue Invest to develop a concept that allows people to direct a portion of their savings into investments with a social benefit, through a transparent and liquid vehicle."
