Real life returns

At a time when some commentators continue to question whether private equity can prosper given the realities of our new financial world, I would like to highlight a sector, often overlooked, in which the whole community has come together to create real value over the last three years. 

That sector is the third sector, and the value created is social value.

In its first impact review, industry initiative the Private Equity Foundation (PEF) demonstrates just how effective the private equity toolkit and its people can be in helping charities.

Shaks Ghosh

Out of 11 organisations in PEF’s portfolio, six are exceeding their set target (which uses lives reached as a rough proxy for investment return), two are on track and three are underperforming. In less than three years, this equates to 18,975 extra young lives helped through PEF’s work.

But how does PEF go about it? Its approach largely mirrors the private equity approach but substitutes charities for businesses.  It grants funding instead of investing in equity and aims to create social value and improve charity sustainability, rather than make a financial return upon exit.

PEF’s approach is to find interventions which are highly effective in helping young people not in education, employment or training (NEET), or children at risk of becoming NEET in later life, and to offer them the powerful combination of money and expertise they need to multiply their impact.  The level of pro bono business, financial, legal and strategic experience which PEF is able to call on is unprecedented.  And the 9,500 hours given to date, are on top of the £15 million (€17 million; $25 million) the private equity community has also donated.

The results which can be achieved by the right pro bono help are outstanding.  For example, although ambitious and with strong leadership, School-Home Support (SHS) hadn’t grown organically for a number of years until PEF’s grant and input of expertise helped it put the building blocks in place.  Volunteer teams worked on everything from strategy, sales & marketing training, improvement of financial and reporting systems, to an office move.  In just over a year, SHS has achieved a 40 per cent growth in service capacity, increasing the number of children it helps from 22,000 to over 30,000 a year.

The impact review also shows that PEF has enabled five times funding leverage on key investments by enabling charities to tap other income sources ranging from schools to government agencies, as well as other private funders.

Portfolio charity Tomorrow’s People has leveraged over £3.8 million of funding from other sources for its young people’s programme following PEF’s engagement.  Chief Executive, Debbie Scott, says of PEF’s involvement: “I have no doubt that this has put us in the best possible position to raise further funds to scale up.”

So, I invite any naysayers out there to visit PEF’s charities, to speak to our pro bono supporters, to see for yourselves the added value, measured in terms of lives changed for the better, which private equity is delivering.  I would be honoured to show you a different industry perspective.

Shaks Ghosh is chief executive of the Private Equity Foundation.