The Schroder BSC Social Impact Trust is aiming to have 80% of its IPO proceeds deployed by the end of the year as it eyes up a diverse pipeline of social impact projects.
On Tuesday, the trust reported a net asset value total return of 6.1% between inception on 24 September 2020 and 30 June 2021, compared with its performance target of CPI +2%. On a share price basis, it delivered a 3.3% total return during the period.
The company listed on the premium segment of the London Stock Exchange on 22 December 2020, raising £75m. Big Society Capital (BSC) manages the company’s portfolio while Schroders is the alternative investment fund manager (AIFM) with responsibility for risk management and distribution.
BSC chief investment officer Jeremy Rogers told Portfolio Adviser investment gains were mainly driven by strong performance in its seed capital portfolio, which BSC provided at inception with a value of £49m before investing a further £22m.
Rogers said this portfolio contained more mature assets, including Bridges Evergreen Holdings, Rathbones Charity Bond Portfolio and the Charity Bank Co-investment Portfolio. The Bridges Evergreen Holdings fund benefited from two investments, in particular: AgilityEco, which tackles fuel poverty and New Reflexions which provides children’s services.
“That seed portfolio was really meant to drive returns as the rest of the portfolio ramped up and that’s very much what we’ve seen in these results,” Rogers said.
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Capital committed quicker than expected
At the end of June, the trust had deployed 66% of IPO proceeds into 23 investments across three areas: high impact housing, debt for social enterprises and social outcomes contracts. At the end of the reporting period, 79% of the committed portfolio was underpinned by government-backed revenue streams.
Rogers said positive social impact market developments since launch had meant the team was able to commit capital quicker than expected. As of 26 October, deployment was in the “low seventy percent” region and Rogers expects it to be nearer 80% by the end of the year.
The aim is to reach 100% deployment over time but Rogers said realistically as with any private markets portfolio in terms of when distributions and drawdowns happen, liquidity has to be managed.
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Liquid ESG funds
Up to 20% of the trust’s NAV can be invested in liquid ESG funds to maintain liquidity and avoid cash drag, and at the end of June this exposure stood at 14%, or £11m.
Funds used are the Edentree Responsible and Sustainable Sterling Bond fund, the Rathbone Ethical Bond fund, the Threadneedle UK Social Bond fund, and the Twentyfour Sustainable Short Term Bond Income fund. The trust does not charge fees on this portion of the asset allocation.
As of 30 June 2021, the company had committed £33m to investments in debt for social enterprises or 45% of net IPO proceeds. It had committed £30m to high impact housing (41% of net IPO proceeds), and £8m to investments in social outcomes housing (11% of net IPO proceeds).
Further fundraise this year is possible
The results also said there was potential for a further fundraise in 2021 to invest in an “attractive pipeline of investments”. Rogers said this included further allocations to the trust’s three main areas: debt for social enterprises, high impact housing and social outcomes contracts.
Rogers said the plan was to scale the trust to between £300m and £500m over the next five years but when that happens is a function of its shareholders.
“That’s very much of the ambition,” he added. “The underlying markets we’re investing in here are really quite significant. So, the opportunity for the trust to scale is definitely there.”
