INVESTMENT
The vast majority of bonds can be easily bought and sold on markets, such as the London Stock Exchange, just like equities"
invest in these bonds. In characteristic pioneering form, in 2018, the university issued £300m of 50-year bonds linked to the higher rate of inflation, the Consumer Prices Index (CPI), which rose 1.5% in the 12 months to October. This move caught the market’s eye, garnering headlines in the Financial Times because the vast majority of inflation-linked bonds are connected to the higher Retail Prices Index (RPI), which rose 2.1% over the 12 months to October. Investors have been pressuring the UK’s Debt Management Office to launch more CPI-linked bonds since 2012, when the RPI measure lost its status as a trusted measure of inflation. Problems with how some of the data is collected are believed to exaggerate the difference between it and other measures of inflation. Double impact At the other end of the spectrum to the AAA-rated University of Cambridge, the city also offers investors the chance to support smaller organisations. Cambridge-based Allia, which provides support to start-up organisations, bought a majority stake in fixed income broker City & Continental at the start of 2019. Allia’s impact finance arm was then combined with the acquisition to create Allia C&C, which specialises in connecting social and commercial enterprises with investors. At present, eight retail charity bonds from seven organisations helped by Allia C&C are trading on the London Stock Exchange (and can be found on Retail Charity Bonds’ website: £5 m The size of the first social impact bond, launched on 18 March 2010 in the UK by the then justice secretary, Jack Straw, to finance a prisoner rehabilitation programme
retailcharitybonds.co.uk/bonds-listing). These bonds range in yield from 3.9% to 5%, with most being linked to housing associations, for example Golden Lane Housing and Hightown Housing Association. Elsewhere, bonds linked to Cambridge-based projects have also been sold via investment website Ethex, which again has an ethical skew. Electric Blue, which provides electric vehicle charging ports powered by renewable energy, raised more than £480,000 from 130 investors, enabling it to install and run 18 rapid-fire electric vehicle charging points in Cambridge for electric taxis. The bonds, which could be held in a Stocks & Shares ISA for tax-free returns, were aiming to provide annual returns of 5% to 7% to bondholders. Electric Blue’s bonds, however, are unlisted, so once bought, they generally have to be held until maturity. Capital is at risk with these types of bonds and returns are not guaranteed. The financial
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