Bridges Fund Management has held a final close on Social Outcomes Fund II, its second fund dedicated to social outcomes contracts, with commitments of £35m.

Social outcomes contracts are increasingly used by Government to commission vital social services from mission-driven providers. Instead of the traditional ‘fee for service’ approach, these contracts are structured so that the commissioner pays directly for improvements in social outcomes. This gives the provider more freedom to design and adapt the programme, to ensure better outcomes for some of the most vulnerable people in society.

Bridges works with commissioners and providers to structure the contracts, provides the working capital necessary to fund the programme, and supports management to deliver the best possible results.

In 2012, Bridges raised the first fund anywhere in the world dedicated to these contracts, and has since directly supported over 30 projects, committing more than £30m (including £8m from the new fund). These projects include providing family therapy to children on the edge of care; helping people to manage long-term health conditions via social prescribing; supporting young people at risk of homelessness; and providing intensive mentoring and counselling to disadvantaged children who are struggling at school. Collectively, they are on course to deliver over £150m of value to Government.

For its second fund, Bridges originally targeted £25m, with a hard cap of £30m. However, strong demand from a broad range of impact-driven investors meant the fund was significantly over-subscribed; and since the pipeline of available opportunities was also stronger than initially expected, Bridges sought and received consent to raise this hard cap to £35m.

Investors to commit to the new fund include dedicated social investors like Big Society Capital and Project Snowball; charitable foundations such as Guy’s and St. Thomas’ Charity, Trust for London, Pilotlight and The Prince of Wales’s Charitable Fund; local Government pension schemes including Merseyside Pension Fund, global business insurer QBE (as part of its Premiums4Good initiative); and Ceniarth, a single-family office focused on underserved communities.

Mila Lukic, Head of Social Outcomes Contracts at Bridges, said: “In the last few years there’s been a real evolution in the way Government is using outcomes contracts. The early ‘social impact bonds’ were used to test experimental new services on a relatively small scale. The new generation of social outcomes contracts are more about promoting greater flexibility and innovation in the delivery of existing services, using a data-driven approach that helps us better understand how to improve outcomes at scale for some of the most vulnerable people in the country.

“We are proud of the role we’ve played since 2012 in building this promising market, and we’re grateful for the renewed support of our investors as we look to continue this progress and scale our impact. They share our conviction that outcomes-based approaches are a highly impactful way to address acute social challenges, both directly and by acting as a catalyst for policy and system change.”

Aman Johal, Investment Director, Big Society Capital, commented: “Since launching the world’s first dedicated Social Impact Bond Fund in 2012, Bridges have established themselves as a driving force of the U.K. outcomes contract market.

“Big Society Capital is therefore pleased to have committed £13.65 million to Bridges’ second social outcomes contract fund. With contracts being launched across children’s services, homelessness and health and social care, the fund will tackle some of society’s most entrenched issues with a focus on those with the most complex needs. We were particularly pleased to see a wide range of both new and existing investors taking part in the fund, which we believe has the potential to support positive social change.”These projects are also having a broader systemic impact by changing the way health and social outcomes are commissioned and achieved. For example, the social prescribing programme is helping the NHS to invest in prevention. Similarly, the housing support programmes are helping to pull together a number of different public services in a flexible, tailored way, to better meet the varied needs of those in housing need.

Bridges has also been applying its experience and market-leading expertise to development impact bonds, which are essentially social outcomes contracts in developing markets, commissioned by donors and philanthropic funders. The team recently supported Village Enterprise as it raised money to deliver a poverty alleviation programme in sub-Saharan Africa, and has also been working with the European Bank of Reconstruction & Development on a potential youth unemployment programme in West Bank and Gaza.