Social impact investment companies now manage £3.9 billion of assets

Managers discuss care homes, social housing and homeless accommodation.

Socialhousing.jpg

Investment companies making social impact investments now manage £3.9 billion of assets, according to Jura Capital and the Impact Investing Institute, having grown from zero ten years ago1. These companies allow investors to target positive social outcomes as well as a financial return.

On Tuesday 15 June, the Association of Investment Companies (AIC) held a media webinar to explore investment companies investing with social impact strategies, their effects on society and the outlook and opportunities in this rapidly expanding area.

The webinar featured Jeremy Rogers, Portfolio Manager of Schroder BSC Social Impact Trust and CIO of Big Society Capital, Paul Bridge, CEO of Civitas Social Housing, and Kenneth MacKenzie, Investment Manager of Target Healthcare REIT. Their thoughts have been compiled below with those of Andrew Cowley, Managing Partner at Impact Health Partners LLP, the investment manager to Impact Healthcare REIT.

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “Over their 150-year history investment companies have always adapted to meet investors’ needs and they continue to do so today. More and more investors want their investments to make a positive difference as well as a financial return and investment companies are perfectly placed to make this happen. The closed-ended structure allows investment companies to invest for the long term in a diverse range of assets, from homeless accommodation to social enterprises, which can have a real impact on people’s lives.”

Helping society

Paul Bridge, CEO of Civitas Social Housing, said: “The strategy provides high-quality, long-term homes within local community settings for the most vulnerable people in society in order that they can receive appropriate care and support. The objective is to achieve better personal outcomes whilst offering savings for the public purse against the cost of more remote, institutional provision. Typically residents have a long-term significant care need such as a learning disability, mental health issue or autism. Alternatively they will require support as a result of being homeless, having suffered from domestic violence or coming out of hospital care and requiring support before returning home. The average age of our residents is presently 33 and the greatest area of demand is often young people coming out of children’s services and requiring long-term adult provision. At any time, there is much greater demand for appropriate adapted community housing than supply.”

Kenneth MacKenzie, Investment Manager of Target Healthcare REIT, said: “We love our mums and dads, and perhaps especially our grampas and grandmas. We want to have them well looked after and cared for, especially in old age, when frailty and dementia are prevalent. Great care homes do that really well.”

Jeremy Rogers, Portfolio Manager of Schroder BSC Social Impact Trust and CIO of Big Society Capital, said: “In the UK, an increasing number of impact-driven organisations are developing investable solutions to significant UK social challenges, but they can lack access to capital to scale. We invest in the more proven models and managers in private markets that can deliver high social impact alongside good risk-adjusted returns to investors, with low correlation to mainstream markets.

“We target investments benefiting more vulnerable and disadvantaged people, tackling issues such as homelessness, domestic abuse and children on the edge of care. We invest in three asset classes – high impact housing, debt for social enterprises and social outcomes contracts. In each area, our investments receive revenue primarily from government sources, which have historically been resilient through economic cycles. We look for areas where enterprises can generate significant savings for government and society, which can also provide additional revenue resilience.”

Andrew Cowley, Managing Partner at Impact Health Partners LLP, the investment manager to Impact Healthcare REIT, said: “Our portfolio provides crucial infrastructure supporting vulnerable elderly people across the UK. Our tenants use our assets to provide an essential care service, demand for which is not directly correlated with economic conditions. In the UK, we see sustainable growth in demand for elderly care in the main part due to a rapidly ageing population, constrained supply of beds not keeping up with this demand, and a highly fragmented market with demand for dementia care forecast to grow.”

Managing risk

Paul Bridge, CEO of Civitas Social Housing, said: “It is important that the provision of specialist accommodation is delivered in close collaboration with local authorities and families. This is to ensure that the accommodation is adapted appropriately, is well located within a community setting and the rent is fair against the nature of the specialist provision. We rigorously test all these issues prior to the acquisition of existing or financing of new developments and have rejected over £600m of transactions for some or all of these reasons. Demand risk is mitigated by delivering a quality offering that is attractive to both local authorities and families. From a macro perspective it is mitigated by the fact there is very significant demand as a result of individuals wishing to live within their own communities, and by growth in many of the underlying conditions.”

Jeremy Rogers, Portfolio Manager of Schroder BSC Social Impact Trust and CIO of Big Society Capital, said: “Given the high weighting of government revenue, policy risk is an important factor for our investments. We focus on a number of factors that can help mitigate this. We target issues that can have a transformational impact on people’s life chances, which are a priority across the political spectrum and have historically had more stable funding sources. We aim for diversification across policy areas, so the portfolio is not overly exposed to any particular policy change. We look for investments that have contracted revenue and/or asset backing, which can provide an additional mitigant to policy change. Finally, and most importantly, as the government savings from our investments are often multiples of the cost, they have greater policy resilience in a constrained fiscal environment, as we have had for the last decade or so.”

Andrew Cowley, Managing Partner at Impact Health Partners LLP, the investment manager to Impact Healthcare REIT, said: “Our top priority is to help protect the wellbeing of the group's tenants, their residents and their healthcare professionals, as well as wider stakeholders, and to responsibly support and deliver value to them over the long term. During the early weeks of the outbreak, we focused on understanding the effects of the pandemic on our tenants' staff and residents, and shared areas of best practice performance amongst our tenant group. We listened to tenants' concerns on the availability of PPE and sourced a bulk order of PPE that was distributed among these tenants that needed the support. As the pandemic environment stabilised, we began discussing ways to support them with occupancy recovery plans, where required. A key theme was the benefit of thermal imaging cameras to help monitor the health of those entering the home. We agreed a funding and roll out programme across all of our homes.”

Benefits of the closed-ended structure

Jeremy Rogers, Portfolio Manager of Schroder BSC Social Impact Trust and CIO of Big Society Capital, said: “Big Society Capital has been investing in high impact opportunities in UK private markets since 2012 – we invest alongside institutions such as pension funds, insurance companies and endowments. Historically it has been more difficult for many investors to access these opportunities. We were really excited to launch the investment trust with Schroders in 2020 to enable broader access to high impact private market opportunities. The listed structure removes barriers for investors when investing in private market funds such as sporadic access, timing of fund openings, high investment sizes and liquidity challenges. In addition, Schroder BSC Social Impact Trust enables access to hard-to-reach high impact investment funds and opportunities. These include funds that are closed to new investors and co-investments only available through BSC’s broader portfolio relationships.”

Most exciting portfolio themes

Kenneth MacKenzie, Investment Manager of Target Healthcare REIT, said: “Modern, purpose-built real estate, with bedrooms all having en-suite wet room facilities, helps our seniors to live in a holistic, generous and loving retirement community, and their carers to have appropriate facilities. The complete anomaly of the sector is that only 27% of the beds have appropriate en-suite facilities.”

Jeremy Rogers, Portfolio Manager of Schroder BSC Social Impact Trust and CIO of Big Society Capital, said: “Across the areas we invest, the central theme is the ability to have significant and lasting social impact, alongside generating significant savings for government and sustainable returns for investors. We are looking for investments that bring together a number of complementary characteristics that drive value. An example of a recent investment is Positive Steps Partnership – this is a Dundee-based charity that been supporting drug users and ex-offenders for over 30 years. Dundee has the highest level of intravenous drug deaths in Europe, and Positive Steps has built significant experience and positive results in working with this group. Our investment is helping it to bring its provision of accommodation and expertise to a greater number of people in need – supported by statutory funding sources.”

Paul Bridge, CEO of Civitas Social Housing, said: “The theme we are most excited about is being able to not only provide quality homes for those most in need with a lower risk to investors, but also being able to produce an outstanding level of social impact. This is demonstrated through independently measured substantial savings to the taxpayer of over £60m a year, outstanding transformations in residents’ life experiences, again independently measured, and the ability to bring large scale institutional quality in terms of asset management, carbon reduction and management.”

-ENDS-

Follow us on Twitter @AICPRESS

Notes to editors

  1. Asset data correct at 31/05/21. The first social impact investment company was Target Healthcare REIT, launched in 2013. The other seven companies are Civitas Social Housing, Home REIT, Impact Healthcare REIT, PRS REIT, Residential Secure Income REIT, Schroder BSC Social Impact and Triple Point Social Housing REIT. Source: Jura Capital/Impact Investing Institute.
  2. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 361 members and the industry has total assets of approximately £249 billion.
  3. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.
  4. To stop receiving AIC press releases, please contact the communications team.