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Schroders and Big Society launch Covid trust

David Stevenson, 24/11/2020

Schroders has teamed up with Big Society Capital (BSC) to launch a £100 million social impact trust that is hoped to hit up to £500 million within five years.

The trust will invest in a diversified portfolio of private market impact funds, co-investments alongside impact investors and direct investments into private market social impact funds.

While many of the aims of the trust are to do with dealing with the fallout from Covid, Jeremy Rogers, chief investment officer of BSC, told fundeye the trust was not actually set up to deal with the pandemic.

“This [trust] has not been specifically set up for Covid, we started planning it a year ago with Schroders. However, the pandemic has highlighted the greater need around these issues, it’s also sharpened investors interest in impact in their portfolios in terms of broader ESG and delivering impact,” he said.

The impetus for a vehicle of this kind seems to have emanated from wealth managers according to Mr Rogers. “We have significant interest from all the large wealth managers. Underlying clients include charities and endowments, high net worth individuals and other institutional investors, a real mix of investor type,” he said.

The trust itself will aim to provide a net asset value return of CPI plus 2 percent per annum, averaged over a rolling three- to five-year period, once the portfolio is fully invested.

This is by no means an income product but should pay a dividend yield of between 1 and 2 percent,

Regarding the types of assets, Mr Rogers said that two thirds will be inflation linked, with one-third having no link to inflation but invested in short duration niche fixed income products like charity bonds. These instruments, a type of retail bond are fairly illiquid, so suit the closed-ended fund model.

“It’s generally private funds that do this type of investing so it’s generally not that easy to invest into these types. People have been saying we need a better way of accessing this. It’s coming from underlying clients demand, people asking their wealth managers ‘how do I invest in this?’ and also an understanding by the wealth managers themselves that actually investing in this area partly because of the diversification benefits has a positive place in the portfolios,” concluded Mr Rogers.

The trust is seeded with £60 million from BSC which unlike many other parts of the market had a fairly successful start to the year, returning 4 percent. It is the fact that these assets are less correlated to the wider equity market which may also draw in investors to this interesting product.

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