Tax Relief to Be Introduced to Encourage Social Investment

A welcome announcement in the government’s Autumn Statement is the fact that there will be a new tax relief for social investment, which will be launched in April 2014. The news has been heralded by Nick O’Donohoe of Big Society Capital as well as other investment experts.

Whilst the prospect of this tax relief is not necessarily new, as this was originally mooted back in June 2013, the scope of the relief to be actually offered is far wider than when the idea was first put out to consultation. In conjunction with the enhanced tax relief plans, the government has also produced a so-called “road map” for social investment, which will be released next January.

Social Investment Helps the Community

The document is said to laud the work of social organisations, recognising that they help to solve social problems, develop a sense of community and above all help to promote and contribute to economic growth.

The announcement comes following criticism that the original consultation, which took place in June, was too narrow. The original proposal suggested that investments in social enterprises would benefit from a similar tax relief to that provided in the Enterprise Investment Scheme, allowing an investor to claim back a maximum of 30% of their initial investment through tax when equity-like investments are made in charities.

Under the new plans, the structure is expected to remain the same but the relief will now cover social impact bonds and will also allow items such as unsecured loans to be covered. Similarly, far larger investments than were initially mentioned are thought to be covered by the scheme.

The CEO of Big Society Capital, Nick O’ Donohoe, stated that he was fairly pleased by the announced changes. “Based on discussions with the Treasury, we feel very optimistic that this is going to be a bold step forward.” At the same time, O’ Donohoe stressed that more could be done: “What we have at the moment is very high level, but we’re happy with the basic principles being proposed.” Whilst there was a definite sense of positivity about the changes, a sense of disappointment that tax relief only covers direct investments rather than those made to social investment funds remained.

According to law firm Bates Wells Braithwaite, there was a potential issue surrounding a number of social enterprises whose legal model was not asset locked. The senior partner at the firm, Martin Bunch, has carried out much work relating to social enterprises such as charities.

Hedge Fund Investment News

For the fifth year running, hedge funds have underperformed according the Standard & Poor’s 500 Index (SPX) as U.S. markets reached record levels elsewhere.

According to the SPX, the hedge funds rise of 0.1 percent is relatively low when compared to S&P 500’s 2.4 percent return, while The Bloomberg Hedge Funds Aggregate Index is 1.8 percent lower than its peak in 2007.

Yet, there have been positive performances for various hedge funds strategies. Multistrategy hedge funds have increased by 6.8 percent with a 0.9 percent rise in December alone with macro funds also rising by the same amount in that month.

Those funds investing on a long-short equity basis (on the rise and fall of the stock market) rose by an impressive 11 percent with a 1.1 percent gain in December.

One of the big winners recently was the $20billion fund run by John Paulson from New York. Paulson & Co recorded a 31 percent increase in its Partners Enhanced Fund which utilizes leverage to increase returns.

Even more impressively, the firms’ Recovery fund increased by 63 per cent in 2013, making it the firm’s best performing fund, although Paulson Partners Fund grew 18 percent and the events-led fund Advantage Plus Fund rose 32 percent by leveraging against companies involved in corporate change such as bankruptcies. 

Bloomberg recently reported on 12 percent increase for Elliot International, the $23.9 billion fund ran by Paul Singer, during 2013.

Louis Bacon’s $12.1 billion hedge-fund firm Moore Capital Management LP grew by 15 percent over the course of the year, while the Moore Macro Managers fund grew 13 percent.

Hedge fund giant Bridgewater’s Pure Alpha II fund rose by 5.3 percent last year while Jim Simons’ $25 billion investment firm, Renaissance Technologies LLC, returned an 18 percent gain in 2013.

While there have been negative reports about the general performance of hedge fund and macro investment over the past 12 months, these firms have shown that with the right experience and strategy it is still possible to buck market trends and return a positive result in difficult times.

Sustainable Investment Provider Passes Important Milestone

The first company launched in the UK to promote ethical investments in a range of projects has passed a huge milestone by raising more than £1 million. Ethex has positioned itself as the first online marketplace dealing with ethical investments, and it has managed to raise £1.17 million since its launch in January of this year. This has shown the desire of investors to place their money with both socially and environmentally sound projects.

Small Investments the Order of the Day

The not-for-profit business has shared some of the figures, and has revealed that roughly half of their investments are relatively small, being worth between £500 and £5000. By far the most popular categories invested in are those relating to social and environmental finance. The million-pound barrier was actually breached in October 2013, with the current figure at £1.17m. With this news there is every reason for Patrick Crawford, the CEO of Ethex, to be fairly happy with his online stock exchange’s early performance.

Ethex was launched to entice new investors into the financial services market, with the hope of boosting the funding of a whole range of ethical projects. The portfolio of products offered by Ethex stands at 32, with options ranging from helping to fund an organic farm to opening savings accounts with a range of small banks and building societies and even buying shares in a solar array based in Somerset.

One of the building societies offered within Ethex’s portfolio is Ecology Building Society, which was founded in 1980 on the premise that it would offer mortgages to people wishing to buy properties which needed extensive renovation. Current CEO Paul Ellis is overseeing the society’s continued growth in this area.

Equity Investments Vastly Most Popular

According to Ethex’s figures, the most popular products are its equity investments, with an overwhelming majority of investors plumping for these. Of these equity investments, just over two-thirds are placed in saving accounts, whilst the rest take the form of bonds.

Investors are attracted to these types of investments due to the belief that ethical products carry a lower risk profile, although Ethex also put it down to the fact that they can offer a higher return. A study carried out by the Global Alliance for Banking on Values in 2012 found that sustainable banks actually performed better than some of their larger mainstream rivals by providing more stable returns and lending more of their capital, proportionally speaking.

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Treasury to sell stock and debt in TARP banks

The U.S. Treasury on Monday said it might hold an auction over the course of the day to sell another spherical of assets acquired from banks throughout its mid-crisis bailout of the monetary sector.

Treasury said it might sell most well-liked stock and subordinated debt investments within the following banks: 1st Western monetary, Inc.; CBS Banc-Corp; Exchange Bank; Market Street Bancshares, Inc.; Fidelity monetary Corporation; Marquette National Corporation; Premier monetary Bancorp., Inc.; Diamond Bancorp., Inc.; Park Bancorporation; Trinity Capital Corporation; 1st Community Financial; Commonwealth Bancshares, Inc.