Merseyside Pension Fund has backed an investment fund dedicated to contracts used by the UK government to commission social services from mission-driven providers.

In a statement, Bridges Fund Management said it closed the social outcomes fund with commitments of £35m (€28m), exceeding the original hard cap of £30m following “strong demand from a broad range of impact-driven investors”. 

The pipeline of available investment opportunities was also stronger than initially expected, said the fund manager.

According to the statement Merseyside was joined by at least one other UK local government pension scheme in committing to the fund, but Bridges was unable to provide further details.

Other investors backing the fund, which is Bridges’ second dedicated to social outcomes contracts, included dedicated social investors like Big Society Capital, and charitable foundations.

According to the statement, social outcomes contracts are structured so that whoever is commissioning the services pays directly for improvements in social outcomes. This was in contrast to a ‘fees for service’ model.

Mila Lukic, head of social outcomes contracts at Bridges, said the way the government uses the contracts has changed significantly in the last few years.

“The early ‘social impact bonds’ were used to test experimental new services on a relatively small scale,” she said.

“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.”

Merseyside Pension Fund is part of £45bn Northern LGPS, one of the UK’s local authority pension fund asset pools, along with the pension funds for Greater Manchester and West Yorkshire.  It had £8.5bn in assets under management as at the end of March 2018.