In 2012 the Big Lottery (now the National Lottery Communities Fund, NCLF) endowed Big Local Trust with £217m. It was set up as a ‘spend out’ endowment, requiring the initial endowment to be spent within 15 years of the Trust being established (expiring on 12 February 2027).
To date, the £217m originally provided to deliver and support the programme was the largest single purpose, Lottery-funded endowment ever made, and the biggest ever investment by a non-state funder in place-based, resident-led change.
Between 2012 and 2024 the investment generated an extra £67m in income, to provide further funding and support to Big Local areas and enhance learning and evidence from the programme.
In 2012, the consortium appointed to manage Big Local and the endowment – led by the Community Development Foundation – established Local Trust as the delivery vehicle for the programme and the sole trustee of Big Local Trust. For reasons of cost, efficiency, security, governance, and risk management, Local Trust decided that the endowment would be managed as a single pool of assets under their control. This ensured that funding was available as needed and that Big Local partnerships could use the allocated funding over at least 10 years, in line with their Big Local plan and in the lifetime of the programme.
Due to the associated risks, it was not possible to simply gift funding to local organisations in the 150 areas, as the Trust Deed expected Local Trust to ensure the funding was allocated for a specific purpose and used in the allocated timeframe. The decision-making bodies, being resident-led partnerships, were – in legal terms – unincorporated associations (groups with shared purposes, not registered as formal legal bodies) and so were unable to hold the money themselves. Locally Trusted Organisations (LTOs) acted as ‘bankers’ on behalf of resident-led partnerships, drawing down funds from Local Trust as plans were agreed.
A Big Local partnership was a group made up of at least eight people that guided the overall direction of delivery in a Big Local area.
A Big Local Plan set out what changes the partnership planned to make, how they planned to deliver on this and how funds were to be allocated. It was written for themselves, their community and Local Trust, as a guide and action plan.
A locally trusted organisation (LTO) was the organisation chosen by people in a Big Local area or the partnership to administer and account for funding, and/or deliver activities or services on behalf of a partnership. Areas might have worked with more than one locally trusted organisation depending on the plan and the skills and resources required.
Among the members of the consortium appointed to manage Big Local was asset manager CCLA. CCLA proposed a 15-year investment strategy for Local Trust, based on how the programme was expected to spend its funding over time.
When CCLA designed the investment strategy it took account of Local Trust’s trustees’ desires, described below.
In the first few years, as expected, the draw down of funds from areas and Local Trust’s spending on support was relatively low (approximately £5m to £11m per year). These withdrawals were largely met from the cash and near cash (liquid assets, easily converted into cash) held within the fund. In the medium-term, a fixed income maturity ladder was created so bond maturities matched against the programme’s likely withdrawal profile. A relatively small portion of the fund was also invested in real assets (equities and similar securities in the UK and overseas, and UK properties) as they were expected to provide a higher return over the long-term but be exposed to volatility in the near term.
The key principles for managing the fund were that:
As a result of this carefully managed investment approach, and strong underlying performance, by June 2019 Big Local Trust had generated £54m of additional returns. By this time area spend had started to increase, reflecting a move out of programme start-up into peak delivery.
While there were strong returns on the investment to 2019, Local Trust trustees decided to adjust the investment strategy in response to the remaining timeframe of Big Local Trust (and Big Local programme), from focusing on investment returns to being based on controlling risk. The aim became to protect the nominal value of capital (a representation of monetary value, based on the minimum amount that must be paid if shares are redeemed).
Local Trust has explored the close-out approach of Big Local in another article.
Various factors were considered in adjusting the investment strategy.
Following the trustees’ decision to move the investment out of riskier assets and into cash or near cash investments and fixed income, CCLA moved the Big Local investment out of equities and property. In 2020, this low-risk approach was extended to the sale of fixed income, so funds were held only in cash or near cash.
This decision proved timely, as the Covid-19 pandemic triggered a stock market crash in 2020 and a period of elevated inflation in 2022, which adversely impacted the value of fixed income investments. With a large proportion of the investment now held in the COIF (Charities Official Investment Fund) Charities Deposit Fund, Big Local Trust benefited from higher interest rates and did not have the risk associated with equities during this time.
By the end of 2024 all the time deposits (like bonds) Big Local Trust held had matured, and the remaining money moved into a COIF Charities Deposit Fund account where it would remain until the endowment is fully spent in 2027.
Funds like the one seen in Big Local are rare, both in scale and time (both the 15-year commitment and the time-limited nature of it).
For the organisation responsible (i.e. Local Trust), the fund provided several benefits.
Effective management of the endowment by Local Trust and the investment managers enabled extra payments to Big Local areas, totalling £155,000 each beyond the original £1m award. The chart above provides an overview of how the returns on investment grew throughout the lifetime of the fund.
The long-term nature of the funding provided through the Big Local programme was also valuable for the communities and neighbourhoods. It enabled residents to build individual and collective confidence and capacity, which takes time and can’t be rushed. In some cases, this development was from a very low base. The long-term funding supported the development of strong relationships in and external to the community. This was particularly important in areas where there was conflict. With time, groups can develop the confidence to navigate conflict, ‘disagree well’, and resist others who seek to obstruct positive local change.
It also encouraged areas to take a long-term view and enabled them to try things, learn, and correct course. This was particularly important where things went wrong, as they sometimes do.
Long-term approaches build trust and credibility with wider communities. Following experience with previous neighbourhood renewal programmes, there is real scepticism in deprived communities about interventions that are so short-term that, by the time they are running and relationships are established, they are already starting to wind down.
The Big Local fund offered substantial support and training to residents to deliver the programme in their areas, which was not paid for from each area’s £1m but from the remainder of the endowment. That support was essential and evolved as the needs of the partnerships have developed.
Local Trust has explored the support provided to residents to deliver Big Local and how much it cost to deliver Big Local in other articles.
