UBS is sponsoring a social impact investment specialist to develop the first in a series of funds aimed to invest in anti-poverty projects in the UK.

UBS is sponsoring a social impact investment specialist called Resonance to develop what it says is the first in a series of tax-relief funds that are designed to invest in anti-poverty projects in UK cities.

The fund, structured as a social investment tax relief vehicle, will be launched in Bristol, in the west of the UK, in the first quarter of this year. UBS hopes that six to eight more funds will be rolled out in places such as Manchester. Each SITR fund will start with around £5 million ($7.53 million) to invest in social enterprises. These funds could become much larger if the European Union gives the green light to UK government proposals, UBS said in a statement.

The plan is to grow £30 million and more of SITR funds in cities across the UK over the next two to three years.

The move is an example of how the lines of traditional philanthropy and investment have become blurred, with organisations seeking to tackle certain problems harnessing some of the ideas from the finance sector. 

The funds are designed to support social enterprises while still providing a risk-adjusted return for investors. The issues covered by the investments include job creation; skills development; debt reduction; helping addicts and ex-offenders; alleviating long-term unemployment, and reducing living costs.

“History has shown that we cannot expect governments and charitable organisations to resolve enduring social issues on their own. The SITR fund will hopefully connect capital markets to the social sector and that offers a potentially innovative agent of change. We want our clients to have access to this sort of thought leadership and practical social investment opportunity,” Jamie Broderick, chief executive of UBS Wealth Management, said.

Resonance produced a report in October last year summarising work it undertook for 12 months to develop a city-focused social investment fund in Bristol.

Social investment tax relief is designed to reduce the cost of capital (the funds will offer loans with interest rates between 4 per cent and 7 per cent, unsecured) for social enterprises that need funding to scale up the impact of their projects. It reduces the risk for investors because they receive 30 per cent of their investment back through the tax relief.