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Back in 2010 the acclaimed Capital Matters report concluded that there was a serious lack of investment in the arts and culture, and that arts enterprise was being held back by the absence of such finance, which was rendering the Boards of arts organisations highly risk averse. Astonishingly, eight years on, nothing has been done to address this matter. This blog is a call for the establishment of a Limited Profit Investment Fund for the Arts, a new kind of investment fund capable of unlocking the dynamism and self-sufficiency of the arts sector, and allowing it to thrive in the new digital environment.

As someone who has founded two new arts organisations since 2003, I know from my own experience that it is almost impossible for an arts organisation to secure investment enabling it to scale up some of its more successful products or shows, or to use its existing IP rights and assets in order to generate more earned income. This is a huge gap in the market and particularly affects the fortunes of entrepreneurial small and medium-sized arts organisations, which have some of the most innovative ideas for helping the arts to thrive. Nor is it just a question of holding back innovation. If arts organisations were able to attract more money in earned income and to diversify their funding base even in a modest way, the overall financial resilience of the arts would receive a significant boost, with strong knock-on effects for the rest of the knowledge economy. Even a 5% shift in favour of earned income would have a disproportionate effect, especially since money earned in this way is unrestricted and can be applied directly to meet the core costs of an arts organisation.

In my view, the solution is clear. I have been campaigning since 2010 for the establishment of an investment fund for the arts offering a limited (or capped) profit return to investors and designed to provide new sources of investment for enterprising arts organisations, allowing them to develop their existing potential for generating earned income from their assets or IP rights. This campaign led directly to the establishment of an investment fund for the arts in 2016, the so-called Arts Impact Fund. However, in about 2014 this new fund departed from my original blueprint, requiring that any investments it made in the arts would not only need to make a financial return but would also need to achieve ‘social outcomes’. I argued at the time, and still strongly believe, that this fund was thereby rendered of very little use as a stimulus for arts enterprise. Any income generating proposal taken to the fund effectively needs to function as an instrument of social policy. Whilst using the arts to reach out to deprived communities or engage with disadvantaged individuals is very worthwhile, and is to be encouraged, it is something that usually only a few larger arts organisations can aspire to achieve on the basis of their current funding model. It leaves unanswered the question of where small and medium arts enterprises can obtain more straightforward investment funding allowing them to make money from the areas of their operations capable of generating income. As such, I believe that the fund represented a missed opportunity to create more enterprise and financial resilience in the arts.

Just to be clear, most arts organisations are registered charities anyway, with clear social goals. The absence of a simple investment fund for earned income activities deprives them of an opportunity to maximise their efficiency and to earn a surplus on some of their activities, a surplus that could then be reapplied to achieving some of their core charitable objectives. In other words, even the social outcomes agenda suffers from the absence of arts enterprise. In this respect, the arts have a lot to learn from other Not for Profit organisations such as housing associations which now have considerable experience of reapplying surpluses generating from their commercial activities to the achievement of their wider purposes.

As long as arts organisations are effectively unable to attract investment to their earned income generating activities the huge dynamism and creativity that exists within the arts sector will be effectively held back. Is this really something we can afford to allow at a time when traditional sources of arts funding, including grant funding, sponsorship and funding from private philanthropy, are all in decline? If we want the arts sector to be making its proper contribution to the knowledge economy post BREXIT, the creation of a limited profit investment fund for the arts would provide a simple and concrete way in which to release the creativity and enterprise latent within this important sector. It also provides us a way of repositioning the arts and culture in their rightful place at the heart of our society and economy. I have a template for such a fund which I believe can work. If you are interested in such a fund and would like to help in making it a reality, I would love to hear from you.

A former senior City solicitor, Graham Henderson FRSA is now an arts leader and cultural entrepreneur, with extensive experience of developing and curating exciting multi-disciplinary arts programmes.

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