Diversified Impact Fund  

Dear Investor,

We are delighted to announce that the Diversified Impact Fund (DIF) has committed $750,000 to Project Independence (PI). PI is a social housing model for people with mild intellectual disabilities that supports social and financial independence within a safe and caring community. More information on this investment is shared below.

We have been pleased to see multiple DIF investments receive positive public coverage over the past few months as detailed further below; a testament to their performance and innovation in driving social impact.

With the execution of PI legal documentation, the DIF’s active Investment Period has concluded. In February, a $2.5m distribution (or 16.7 cents per unit) was made to investors predominantly from the returns of the Nightingale Village repayment and Aspire Social Impact Bond (SIB) (a performance coupon and unit redemption payments). Over its life, and including PI, DIF will have made 12 investments, diversified across 4 instruments, 5 sectors and 6 target demographics. Eight SDGs are advanced by DIF investments.

We want to share with you some changes within the Impact Investing team. Rebecca Thomas returned from parental leave in early February to her role as Impact Investing Executive Director. We thank Matthew Deeble for his contributions to the DIF as Acting Impact Investing Executive Director. Additionally, after three years with SVA Impact Investing, Tim Pullen left at the end of January to take a research role with the Centre for Social Impact at Swinburne University. We thank Tim for all his contributions to the DIF and wish him all the best.

With the DIF making its final investment and finishing its Investment Period, we have been reflecting on the impact and achievements of the fund and its place in the rapidly evolving Australian impact investing market. We invite your thoughts and reflections on the DIF and the Australian impact investing market as a DIF investor.

We thank you for your ongoing support as we continue our focus on driving social and financial outcomes throughout the term of the DIF.

Kind regards,

Key investor information

End of investment period
In line with Investor Advisory Committee approval, the DIF's active investment period concluded on 14 April with the DIF senior debt commitment to Project Independence. As a 10 year closed end fund, the DIF is now in its management period, with the fund maturity at 21 December 2027. The SVA management fee has therefore changed from $270,000 pa (indexed at CPI) (applicable during the investment period only) to 3% of Net Asset Value (excluding SIBs) on 1 April 2023.

Investor Distribution
A $2.5m distribution (or 16.7 cents per unit) was made to investors in February 2023, predominately from the Nightingale Village repayment and payments from the Aspire SIB. Future distributions to investors will be made as investments mature and are realised.

New investment announcement: Project Independence

We are delighted to announce a $750,000 senior debt commitment to Project Independence (PI), a not-for-profit focused on improving the financial and social independence of people with a mild intellectual disability through its social housing development in Phillip, ACT. The DIF’s investment will be used for the construction of PI’s third development which will provide homes for ten individuals and a live in residential coordinator. SVA and PI have been engaging for many years, with SVA providing support and guidance to PI. We are excited to see this project come to fruition and provide homes for ten individuals.

According to the ACT Council of Social Service (ACTCOSS), there is a significant shortage of social housing in Canberra and individuals with mild intellectual disabilities can be placed in entirely unsuitable accommodation (i.e. nursing homes). Through this investment, the DIF has been able to support the scaling of a community focused model that supports residents to live as independently as possible whilst acquiring equity in a property. We greatly appreciate the pro-bono legal services very generously provided by law firm Ashurst on this transaction.

Architectural render of PI Phillip which will provide homes for ten very excited new residents.

Stellar performance from the Aspire Social Impact Bond

In January 2023, the DIF received coupon and redemption payments in relation to its investment in the Aspire SIB. As anticipated, 89% of units were redeemed with payment of $444,400 received alongside a performance coupon of $365,974. The coupon was higher than expected with Aspire meeting actual reduction outcome targets in line with the ‘outperform scenario’ across hospital bed days, convictions, and accommodation periods for the 575 participants. The bulk of these funds were distributed to DIF investors in the February 2023 distribution.

DIF Investments – in the spotlight

Over the last few months, multiple DIF investments have been profiled in the public which is a testament to their commitment and success in delivering social outcomes.

Aspire Social Impact Bond

• The success of the Aspire program in driving landmark change in the way homelessness services are delivered for people experiencing complex homelessness was commended by Nat Cook, South Australian Minister for Human Services, after the release of the Aspire 2022 Annual Report. Nat Cook (MP) stated, “This unique response provides the wider homelessness and community services sector with significant evidence-based findings about what works in helping people overcome their lack of a safe and secure place to live”.

Hayylo

• DIF investee Hayylo announced two new clients: South Australian Bene Aged Care, a not-for profit organisation committed to a better life for older people, and Huon Regional Care, a leading care provider in Tasmania. Bene Aged Care has identified that Hayylo will be part of providing a positive customer experience, in particular for their many Culturally and Linguistically Diverse (CALD) communities by further including families in the care experience.

Maths Pathway

• Maths Pathway was profiled in a case study demonstrating the positive impact that quality differentiated ed-tech can have on growth in learning and educational outcomes for low-SES students. The effectiveness of Maths Pathway in a regional Victorian high school was featured in a report into how Australia can lead the way in shaping educational technology for social good authored by Professor Leslie Loble AM for the Centre for Social Justice and Inclusion at University of Technology Sydney.

Nightingale Village and Synergis Fund

• DIF investees Synergis and Nightingale Housing were highlighted for their work managing social and affordable housing projects in Ross McEwan’s (Group CEO and Managing Director, NAB) announcement of NAB’s target of $6bn of lending to social, affordable and specialist housing by 2029.

Resolve Social Benefit Bond & Newpin SA Social Impact Bond

• Annual reports for the Resolve Social Benefit Bond and the Newpin SA Social Impact Bond were published in March 2023.

Reflecting on the DIF

As the DIF has now concluded its investment period, SVA is turning its mind to the learnings and insights to inform new opportunities for social investment in Australia. As a DIF investor, we would be interested in including your insights and observations in this process. Please email us or reach out – we’d love to arrange a call.

The DIF was designed to target market returns in a nascent and small social impact investing market. Our experience over the past 5 years has highlighted:

• Investee value proposition: DIF had a broad value proposition to investors including providing access to deals that they would otherwise not have been able to access, as well as providing the expertise to due diligence these deals.
  For future social impact investments, what factors are you seeking?
   
• Return/Impact trade off: Within the social impact investing landscape it has become apparent that while some sectors in Australia such as Specialist Disability Accommodation (SDA) housing may be able to generate market risk adjusted returns, the economic features of some models make this unlikely, for example, Work Integrated Social Enterprises with significant wraparound supports and additional costs in the model, designed to alleviate entrenched disadvantage.
  To what extent would you consider sacrificing financial return for a higher social impact?
   
• Strategy/Mandate: Whilst some social impact investments will focus on a sector (i.e. affordable housing) or product (i.e. debt), the DIF was purposefully designed with a multi-sector, multi-product strategy. This presented greater process and management complexity, however provided investors a diversified impact, sector and asset class exposure.
  Thinking about your future investing activities, will you continue to seek similar broader approaches or would you prefer a narrower focus?

• Catalytic/blended/concessional: DIF acted as catalytic capital in its debt investments accepting additional risk and unlocking mainstream bank financing, enabling project completion.
  Would you be prepared to accept additional financial risk to undertake the catalytic capital role? Are there circumstances where you would provide catalytic capital and accept a reduced financial return?

Fund portfolio

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