Warrington Borough Council has announced that it is creating a social impact investment fund aimed at providing ethical returns on up to £75m of local authority cash.
The authority has joined forces with asset manager Altana Wealth, which will manage assets in areas including social housing, solar/wind energy, community lending initiatives, forestry and electric vehicle charging points.
The council said that all investments will be backed by real assets and deliver a real yield with a long dated duration.
Speaking to Room 151, Danny Mather, head of corporate finance at the council, said: “A lot of councils are looking to get into this field but don’t have the staff or resources to do it themselves.
“We have been active in social impact investing for a number of years and are constantly getting phone calls from other authorities asking how they can get involved. There is massive demand for this type of product.”
Mather said that Warrington has consulted with 20 authorities across the country over the past 18 months before bringing forward its proposal.
Mather said that he was expecting around £50m to £70m to be invested initially, with a minimum investment requirement of £1m.
Investments will provide annual income and be held for between seven to 10 years.
Mather said: “This isn’t a money market fund and won’t provide instant liquidity.
“However if someone needs their money back we are confident we can liquidate within a month.”
Initially, the fund will be aimed at attracting treasury investments, bu
Mather said that there has been interest from Local Government Pension Schemes, and the fund could be opened to this sector in future.
Warrington is set to take a cut – Mather said around half – of the management fees, providing income to the authority for services.
Fees will be set at 1.5% a year, with performance fees of 15%, subject to a hurdle of 3%.
However, Mather said that, in time, Warrington will be happy for other councils to take a share of ownership of the fund.
Lynton Green, deputy chief executive at Warrington, said: “Transparency, governance and risk management form the cornerstones of the fund.
“It offers councils an excellent new investment vehicle to diversify their investments into a fund that delivers social impact and offers downside protection and yield.”
Regulated manager Altana will be responsible for providing an investment committee comprised of industry experts, portfolio management, independent oversight and all regulatory matters related to the fund and underlying investments.
The portfolio will be managed by Omar Ghafur, who until recently was the investment director of private equity at pension pool LGPS Central.
In April, Warrington approved £80m of loans to provide borrowing facilities to two housing associations for housebuilding in its area.
In October last year, the authority bought two solar farms to raise an estimated £150m in revenue over the next 30 years.
In 2015 the council led on the structuring of a solar bond investment with Thurrock and Newham councils, which involved the purchase of the UK’s second largest solar farm (60Mw) in Swindon.
In 2017, Warrington joined forces with London Borough of Newham and London Borough of Bexley to invest £12m in a bond secured against two solar farms in Wales and Shropshire.
