Futurebuilders England, the social investment fund, lost three per cent of the value of its loans, but was successful at demonstrating the effectiveness of social investment, according to an independent report published yesterday.
Futurebuilders England was originally set up in 2004 as a £215m grant and loan fund set up intending to encourage charities to deliver more government contracts. It closed early, having delivered £145m of investment. At the time it was the largest single organisation in the social investment world.
The independent report, A Tale of Two Funds: The management and performance of the Futurebuilders-England Fund, was commissioned by Social Investment Business, which ran the fund, and was carried out by the Boston Consulting Group, an independent agency which has written a number of reports on social finance.
The report found that the Futurebuilders’ investments had a -3 per cent rate of return.
“It is easy to forget now that Futurebuilders set out to attempt something that many people thought impossible – to persuade the voluntary and community sector to make greater use of repayable finance,” the report said. “Prior to Futurebuilders' existence, lending to the sector, while not unheard of, was commonly restricted to loans securitised against assets such as buildings or vehicles, so this fund represented a bold new direction.
“It is hard to conclude that Futurebuilders was anything less than a largely positive contribution to the UK social investment market.”
The report said the fund was limited by the fact that ultimate responsibility for the fund rested with three different government departments in the first four years, and in particular that it suffered when it moved away from the Treasury, which supported the fund, to the Home Office, where understanding of it was limited.
The fund succeeded in part because it offered simple loans, the report said.
Sir Stephen Bubb, the chair of the Social Investment Business, which ran the fund, said that this was one of its great successes, in his view.
“We sometimes forget the power of a straightforward loan and this report reminds us,” he said.
The report also found that enough was done to measure the impact of the fund, and there was not sufficient clarity about its objectives.
“It’s inconceivable that any fund set up now could operate without having a structure to measure whether its impact, but these were different times,” Adrian Brown, managing director of Boston Consulting Group and lead author of the report, told Civil Society News.
The report also found that the lack of clarity about objectives had led to accusations from elsewhere that the fund had distorted the social investment market.
“When we spoke to other market participants they said there were concerns the fund prioritised deal flow rather than supplementing what the market could offer,” Brown said.
