The Government's much-vaunted "Big Society" bank launches today with the name Big Society Capital under the chairmanship of Sir Ronald Cohen, a pioneer of the UK venture capital industry.
In its first transaction, the £600m fund has invested £1 million in Private Equity Foundation, an organisation helping disadvantaged teenagers into employment when they leave school. Some £400m of the fund will be made up of unclaimed assets left dormant in bank accounts for more than 15 years, with the remainder coming from HSBC, Lloyds Banking Group, Barclays and Royal Bank of Scotland.
Sir Ronald, who founded the private equity firm Apax Partners and is one of the Labour Party's biggest donors, said that the payment to Private Equity Foundation was an investment rather than a loan and hopes it will yield an annual return of 6.5 per cent.
He said: "We're calling it Big Society Capital to reflect the fact that it's an investment firm and not a bank. There are big opportunities in social investment which is going to become a major area because charitable organisations don't have enough money.
"We are very interested in areas like problem families, healthcare access and education."
As well as bolstering the provision of existing state services, Sir Ronald believes there are opportunities to make money through creative new techniques, such as the "social impact" bond.
The six-year bond – agreed with the Government – uses £5m of cash raised from charities and high net-worth individuals to counsel 3,000 ex-offenders in Peterborough in an attempt to cut reoffending rates. If the scheme reduces crimes being committed by ex-offenders by at least 7.5 per cent, compared with a control group of offenders, then investors take a share of the savings made by the Government.Reuse content