Futurebuilders England, a £145m social investment fund that was launched over 10 years ago, has delivered better than expected results but new report suggests lessons should be learned to move social investment sector forward.
An independent report released today by The Boston Consulting Group (BCG), commissioned by Social Investment Business, gives a unique level of insight into the performance and management of one the most important social investment funds in the UK; the Futurebuilders England Fund.
Futurebuilders is currently managed by Social Investment Business on behalf of the Office for Civil Society. It was the biggest social investment fund of its time and remains the largest intervention of its kind anywhere in the world. The fund provided loan financing to voluntary and community sector organisations in England to help them bid for, win and deliver public service contracts.
“This was a major pioneering initiative, Futurebuilders was a bold and imaginative response by Government to the challenge of reform in public services by growing the third sector. I've seen for myself how loans have transformed communities and grown public service delivery by our sector. We simply must tell the full Futurebuilders story –from its inception to present day, on its 10th anniversary. It’s a success story. Our sector is better as a result of it.”
Sir Stephen Bubb, Chair, Social Investment Business
Over 10 years has passed since its launch in 2004 and the Social Investment Business, the current fund manager, allowed BCG complete access to a decade's worth of data and interviews with many of the individuals involved. BCG was able to undertake unprecedented evidence-based analysis and develop recommendations for social investors based on the lessons from the past ten years.
BCG’s analysis shows that Futurebuilders had disbursed £145 million in 369 organisations including £117 million of loans. Of the loans written approximately 40% are now closed (either paid down or written off) representing 20% (£20m) of capital. The fund has so far returned £47 million to the Cabinet Office.
“Views about Futurebuilders are wide-ranging, however, until now the story of the fund has been told through incomplete data and disparate voices. With SIB offering complete access to a decade's worth of data, and by holding interviews with many of the key individuals involved, we can now paint a more complete picture.”
Adrian Brown, Executive Director, The Boston Consulting Group
This was a pioneering fund and it set out to attempt something that many people thought impossible – to persuade the voluntary and community sector to make greater use of repayable finance. Prior to Futurebuilders' existence, lending to the sector was commonly restricted to loans securitised against assets such as buildings or vehicles, so this fund represented a new direction.
BCG’s analysis focused on the 20% of the book that is now closed which yielded a moderately negative Internal Rate of Return (IRR) of -3% per annum. Given the pioneering nature of the fund, the fact that it was targeting organisations that were unused to accepting loan finance, and that the period included a major financial shock this performance is arguably more positive than might otherwise be expected.
“I believe passionately that this market can grow and key to that growth is the sharing of the experiences of the pioneering organisations such as the Social Investment Business and our peers in the market. This is one of a number of initiatives that we are taking at SIB to increase transparency into the social investment sector and its impacts.
As we enter the second decade of large scale social investment in the UK, independent analysis of social investment funds such as this one by BSC and the Engaged X’s financial index for social investment released last month, will help inform how we progress in this market.”
Jonathan Jenkins, Chief Executive, Social Investment Business
As a pilot fund Futurebuilders was, and remains, a highly innovative fund that helped to catalyse the growth of social investment in England. BCG acknowledges that given the market was largely untested at the outset it was unsurprising that the Futurebuilders teams (and their government handlers) needed to learn throughout the Futurebuilders experience.
BCG was unable to systematically consider the social impact of the fund, primarily because no social impact data was routinely collected over the last 10 years so their only insight is through selected case studies, one of which was Beyond Autism.
In 2010 Beyond Autism received a loan of £2,018,500 from Futurebuilders-England to purchase and redevelop a secondary school in Wandsworth Common, south west London.
“The investment was vital as it enabled us to grow our school from its original size of 18 to 64 and it allowed us to increase the age range of our pupil intake. Prior to the investment we could only take pupils up to the age of 11 years now we can take them from up to 19 years”.
Karen Sorab, Chief Executive and Principal, Beyond Autism
Beyond Autism gives children and young people with autism an education which lets them achieve their full potential, providing each pupil with a personalised curriculum and one-to-one support. Since the investment the charity has created 45 new jobs, growing from 30 to 75 employees, and its annual turnover has risen from £816k to £2,738,500. More FBE impact case studies can be found here.