Newspaper article International New York Times

Putting Social Impact Next to Financial Gain ; London Fund to Acquire Property for Groups That Provide Public Services

Newspaper article International New York Times

Putting Social Impact Next to Financial Gain ; London Fund to Acquire Property for Groups That Provide Public Services

Article excerpt

The Cheyne Social Property Impact Fund plans to buy property that it will then rent to organizations that deliver services like affordable housing and aid for the elderly.

When a potential hedge fund investor recently visited a mental health charity, he asked what the organization would need to help more people.

"Property" was the answer.

Cheyne Capital, a $6 billion hedge fund based in London, hopes to offer that with a new fund that will buy property that it will then rent to organizations that deliver services like affordable housing, aid for the elderly or care through the National Health Insurance.

The Cheyne Social Property Impact Fund, which could start investing on Thursday in Britain, aims to raise about 300 million pounds, or about $470 million, with target returns of 10 percent to 12 percent with leverage. It is expected to charge investors about a 1.5 percent management fee and a 10 percent performance fee after it hits a return rate of about 6 percent.

"There is a tremendous social need for this," said Shamez Alibhai, who will head the investment team and has worked in real estate for 13 years. He has been at Cheyne since 2006.

Government grants for social housing as recently as 2012 were about Pounds 2.5 billion to Pounds 3 billion, Mr. Alibhai said. Those funds have been cut to nearly Pounds 500 million during the British government's response to the economic crisis.

"We hope to play our part replacing some of that," Mr. Alibhai said.

The fund aims to balance financial and social returns. It is part of a growing trend of investing with an eye toward improving society as well, an effort that includes social-impact bonds.

Big Society Capital, a government-established finance group with a social mission, anchored the Cheyne fund with a seeding commitment. The group's chief executive, Nick O'Donohoe, said Cheyne was an "interesting partner."

"They have significant resources," he said, "and the ability to attract substantially more capital" than a typical social-impact organization.

Mr. O'Donohoe acknowledged that the group was skeptical when Cheyne first approached it. But "after spending a considerable amount of time with Shamez and the principals of the organization, we recognized that they were doing this for the right reasons, that they had a genuine interest in creating a social impact," he said. …

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