Bonds can be a great way of raising funds, and Allia in Cambridge has become a leader in doing this for social ventures. Jenny Chapman went to see Phil Caroe at the Future Business Centre.
There was a time when stockbrokers were up there with vicars – trusted, revered and dealing with something mysterious. Things have changed a lot with the former, for a start we are much more aware of the processes and, increasingly, we would like to see at least part of our money being put to good use, as in ‘doing good’.
Step up to the plate Allia, the organisation headquartered in Cambridge and which, over the past 17 years, has raised £55 million via bonds.
This money has been largely used to fund social housing, but also the Future Business Centre on Kings Hedges Road in Cambridge, where Allia is based, along with a myriad of social enterprises big and small. FBC is another big Cambridge success story, now in Peterborough as well.
Anyway, I went to see Phil Caroe, pictured above, Allia’s director of social finance, to find out about retail bonds, something you and I can invest in with as little as £1k whereas, in the past, bonds have been largely reserved for the big players, not least because the admin made it uneconomical for small investments.
First, the background to Allia, which came out of a think-tank in Cambridge called Relationships Foundation. This was involved in trying to bring the wider community together to help the disadvantaged, particularly the unemployed.
“Fundraising for this sort of thing is very difficult, asking people to support those who do not have a job. We thought that by asking people to make an investment from their savings instead, we might be able to unlock more support, and they could be confident they would get their money back in five years,” Phil says.
“We looked at copying what the banks do, but for social benefit. We would be able to lend from bonds but, unlike a bank, there would be no tax and no shareholders to oblige. We could also invite investors to waive interest payments.
“At the heart of where we are is civic social mission, and investors know that if they are putting money into our bonds it is being used entirely ethically.”
Allia did its first bonds under the name City Life, but it turned out there was a church organisation in Cambridge with the same name. Under the City Life name it did a number of bond campaigns around the country, but not in Cambridge until it was recognised there are some real pockets of disadvantage here. Since then, Allia has been supporting social enterprises in Cambridge – and boy, has this taken off!
“We did a strategic shift. Rather than focus on specific social issues it seemed better to be an intermediary and know how to put together bonds to support other charities.
“We now have three different work streams, with the central mission still to enable social projects to deliver.
“First there is the workspace and enterprise support here in the Future Business Centre and in Peterborough, serviced office space and an incubator, and we are working with Judge Business School on social enterprise. It is a package of services which enable people to be inspired to think about social enterprise. They can then have affordable space and join a community here were people can interact – it’s much more than commercial serviced office space, it’s really about trying to create a community.
“Social finance is the next stream, and we’ll come back to that. The third stream is what Martin Clark is doing, the development strand, incubating our own ideas, skills for young people, difficult construction challenges around affordable housing, looking at new environmental technologies, working with local authorities to free up small parcels of land for housing, trying to use the wealth of the networks we have developed over time, thinking differently, coming up with new approaches to tackling issues.”
I know, it’s taking a while to get round to the retail bonds, but they have to be put in context.
“The stereotype of charities is living hand to mouth and rattling the tin, but while philanthropy and giving are essential, many charities act like businesses these days, raise capital to grow. But it’s not just about raising money, it’s also about engaging the community, and with retail bonds, individuals can invest.”
Phil goes on to talk about investment portfolios and how many of us might like to put some of it into a social enterprise of some sort.
The retail bonds idea came from Italy, where it has proved popular and there is a thriving market; what was needed here in the UK was what the Italians have, a trading platform for retail bonds.
That was six years ago, and since then more than 50 bonds have been issued and £4.5 billion raised.
Two years ago Allia, in partnership with investment bank Canaccord Genuity, set up a trading platform for retail charity bonds. “We have issued two bonds since, for Golden Lane Housing, which was set up by Mencap and provides homes for people with learning disabilities. The homes generate rental payments, which come from government. In the past there were lots of grants, but that situation has changed dramatically, bank lending became very difficult.
“Golden Lane had raised its own, unlisted bond in 2013, but when it needed to raise more money it felt it had exhausted its market and needed a wider, mainstream base.
“The bond was £11 million, very small. It took just under two weeks to get the investors, which in bond terms is quite slow – it’s much easier to raise large sums from institutional investors. Golden Lane’s previous bond, £10 million, took six months to raise.
“The second bond we did was for High Town Housing Association, which is in Beds, Bucks and Hertfordshire. That was £27 million and took just over two weeks – and we could have raised more, but closed it when the Conservatives announced plans for Right to Buy. That was a bit of a blip.
“We’re working on a good pipeline of deals now. If you are interested in investing talk to a broker, and you can look on the website retailcharitytbonds.co.uk, which keeps you abreast of opportunities.”
Allia, working with Canaccord, screens investments and decisions are made by an independent board.
Phil says nobody else is doing what Allia does, and that he and his colleagues are currently working with the Treasury to change tax regulations which prevent bonds from being less than £10 million.
“I would be remarkedly surprised if anyone else was doing what we do, it is so complex and time-consuming, but there is a perseverance in Allia. It took years and years to raise the bond to build the Future Business Centre.” The investors in that bond are ARM, TTP, RealVNC, Xaar, the Chamber of Commerce and the building’s developer.
I came away convinced.
SOURCE: Cambridge-News.co.uk
