The fund, which will be open to retail and institutional investors from January 2014, plans to differentiate itself from other ethical products by investing in fixed income securities of organisations which support socially beneficial activities and economic development, as opposed to applying a negative screen to holdings.
UK Social Bond will be run by Simon Bond, credit fund manager at Threadneedle and will target returns in line with a UK corporate bond index.
Big Issue Invest, which launched in August, has established a ‘Social Assessment Methodology’ in conjunction with Threadneedle, to guide the fund’s investment decisions, which looks at social outcomes, geography, levels of social development, nature of the financing and an ESG-assessment on bond issuers.
UK Social Bond will launch with £10m seeding from social investment bank Big Society Capital and £5m from Threadneedle.
The fund will have a 0.30% AMC for institutional and retail investors through a platform which will be split between the two organisations.
Threadneedle has pledged to contribute a portion of its fee to the Threadneedle Foundation, which provides support for charitable activities.
The fund will offer daily liquidity, will not apply a performance fee and minimum investment will be £2,000.
Campbell Fleming, chief executive at Threadneedle Investments, said the launch adhered with governmental plans to bring investment into public services via financial initiatives.
He 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 which also aims to generate a return in line with a UK corporate bond index.”
Big Issue Invest chief executive Nigel Kershaw added: “The UK Social Bond fund extends and supports [our] mission by investing in organisations that create social benefits and support more sustainable economic development and job creation in the UK.
“We have developed a unique social assessment methodology, with input from Threadneedle’s governance and responsible investment team, enabling the fund manager to direct money into organisations that improve the lives of individuals, communities and society as a whole.”
