The social investment wholesaler Big Society Capital will launch a £15m "results fund" to invest in third sector organisations competing for payment-by-results contracts, according to Nick O’Donohoe, its chief executive.
Speaking at the Charity Finance Group’s London members meeting yesterday, O’Donohoe said Big Society Capital was in the process of selecting an organisation to manage the fund. "We have looked into creating several specialist funds, and one we’ve already talked about is a results fund," he said.
The fund will receive a return based on the success of the organisations it invests in, a spokesman for BSC told Third Sector after the speech. He said the social lender had combined with three other investors to provide the capital for the fund, and expected to announce the manager in August.
Once the fund was up and running, said the spokesman, it would raise more capital from other investors to increase the number of investments it could make.
O’Donohoe said that BSC would be interested in developing more funds to target particular areas, and would not necessarily wait for applications from others.
He said he anticipated that "four to six" more new funds would be launched in the next 12 months, and that his organisation had so far received about 35 credible applications to run new funds.
"These range from major charitable foundations and finance institutions to just a group of guys who have experience and are interested in working in this space," he said.
O’Donohoe also told the meeting it was "ridiculous" that no tax break was available for investment in social enterprise.
"We’ve got tax breaks for enterprise investment, but you have social enterprises creating a social good and there’s no tax break for investment in them," he said. O’Donohoe said that community investment tax relief "functions to some extent but is barely used"; something better was needed.
"The government has committed to look at barriers to social investment, and the lack of an effective tax break would be number one on our list," he said.