Europe’s 'only specialist investor in impact investing firms' predicts multi-billion pound future for first social housing fund deal
Zamo Capital, the new company backed by Big Society Capital to help scale up UK social investors themselves, has confirmed its first deal with Social and Sustainable Capital. Zamo's investment will help expand the SASC team and fund costs of raising more capital for its award-winning housing fund.
Zamo Capital, which bills itself as Europe's first specialist investor in impact investment firms, confirmed its first deal this week – putting its backing behind the UK social housing sector as a market offering the opportunity for both stable commercial returns and high social impact.
Zamo, founded last November, is backed by Big Society Capital and headed by Jim Roth, who previously co-founded and still sits on the board of LeapFrog Investments, the world’s first billion-dollar private equity firm dedicated to impact investing.
The firm said its investment in Social and Sustainable Capital (SASC), a UK impact investment manager with a dedicated 'Social and Sustainable Housing' (SASH) fund, came at a time when the social housing sector was “showing marked resilience in comparison to the majority of the real estate market”.
The impact of Covid-19 has increased the already considerable demand for safe, stable housing for the most disadvantaged
“The impact of Covid-19 has increased the already considerable demand for safe, stable and appropriate housing for the most disadvantaged in our society and reinforced the appeal of stable rental payments paid by government,” it added.
The amount and type of investment made in SASC was undisclosed. A Zamo spokesperson would only comment that in general the firm offers both debt and equity investment, and typically aims to achieve higher returns than those achieved by a typical limited partner investor.
SASC’s Social and Sustainable Housing Fund generates commercial and social returns through loans to high-performing charities and social enterprises with expertise in managing social housing to buy properties. The fund aims to raise £100m by autumn next year, which would allow its investees to provide homes for 10,000 people. Launched last year, it has confirmed seven deals to date (including with Coventry charity Valley House, whose team is pictured above); its first, with Hull Women’s Network, won this year’s NatWest SE100 Social Investment Award.
- Read: SE100 2020 Social investment award winners: Social and Sustainable Capital and Hull Women’s Network
Zamo provides capital, intensive support and its network of investors to impact fund managers, to help them raise new capital to grow. The SASC deal will include expanding the team and funding the cost of raising more capital.
Roth said Covid-19 was creating more need than ever for social housing, and that the SASC housing fund had “the potential to grow to a multi-billion pound social housing fund”. He credited SASC managing director Ben Rick for building “a dream team of investment professionals” and a “governance board of private equity and other investors that would not look out of place in a FTSE company”.
SASC's governance board of private equity and other investors would not look out of place in a FTSE company - Jim Roth
Other investors in the housing fund include institutional asset managers, endowments, foundations and family offices such as CCLA Investment Management, Big Society Capital, University of Edinburgh Endowment, and Garfield Weston Foundation.
Roth added: “The SASC housing fund, backed by both property and very stable government welfare payments, helps transform social enterprises from being renters of property to owners. It provides investors with an opportunity for commercial returns as well as a way to fulfil their ESG [environmental, social and governance] obligations. It will be attractive to a broad range of investors who want to both make impact investments and meet their fiduciary obligations, including institutional asset managers, local government, foundations and family offices.”
Investing in investment managers
Claire Kearney, head of portfolio at Big Society Capital, said Zamo’s first investment would “support an excellent fund manager at a key time to respond to the growing demand for social housing”.
Big Society Capital appointed Zamo in late 2019 to manage a £15m fund to provide growth finance and intensive support to a number of fund managers. The SASC investment is the first of at least five such deals expected over the next four years.
Kearney added: “We backed Zamo as part of our strategy to help grow the wider social impact investment market, so this is another welcome step towards increasing market scale and sustainability and ultimately supporting more enterprises to deliver more social impact.”
Big Society Capital appointed Zamo to manage a £15m fund to provide growth finance and intensive support to fund managers
Unlike most Big Society Capital investments, which go into funds to be invested directly into enterprises, this investment is into the investment managers and their teams themselves, with a view to strengthening what it calls an “important intermediary layer” in the market.
Big Society Capital has invested more than £30m so far directly into social investment intermediaries in this way, and currently works with around 35 UK fund managers, at various stages of development, to support their growth and sustainability. Its investment in Zamo aims to ensure more sophisticated fund managers can access more ‘accelerator’-type operational support, helping them to raise money from other investors and ultimately grow their impact.
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Header image: Valley House, a charity that supports vulnerable young parents and victims of domestic abuse in and around Coventry. In January, SASC invested £2.5m in the charity through its housing fund.