At the turn of the millennium, the Golden Bottle Trust saw potential symmetries in recycling profits derived from banking in London into microfinance for some the poorest people in the world. One of the joys of microfinance is that, done well, the money is recycled multiple times. A disturbing aspect of our grant giving was how beneficiaries returned for more money year after year.
There are problems with microfinance institutions becoming grant-dependent and we changed to lending to a microfinance debt fund. Another issue that emerged was that microfinance only touches one of many needs, and we wanted to be able address many social failures through market disciplines.
From there it was a logical step to explore lending to charities and investing in social enterprises. We have done this for several years, onshore and offshore, with an allocation of up to 20% of the endowment. The results suggest it is possible to have very positive social impact, to preserve the capital, and to earn modest but uncorrelated returns.
We continue with social investment, now in partnership with others. Project Snowball llp is a partnership running the qualifying social investments of Panahpur and the Golden Bottle Trust. It seeks to expand with other partners with a view to offering an institutional-quality, diversified, social investment fund accessible to the ordinary retail investor by way of a listing on a public market.
Early investments included the likes of Big Issue Invest and Bridges Ventures, both of which now have new vehicles fundraising. A feature of such investments is that they are not accessible to the normal retail investor.
Project Snowball is also attractive to charities which have experimented with social investment but find the holdings burdensome in administration terms. They can exchange such holdings for a stake in a professionally managed firm which fits in their investment portfolio.
Finally Project Snowball is also aimed at large institutional investors who recognise that much of the public markets returns are all highly correlated, and whilst they seek yield they are attracted to relatively uncorrelated returns available by social investment.