4 Interviews
We conducted seven in-depth interviews with a selection of market participants to explore their views on security trustees in more detail. Interviewees included social investors, social enterprises, legal advisors, and intermediaries. The interviews provided qualitative insights that complemented the survey findings.
We structured the interviews around three key themes: the current landscape of security trustees in social investment, core problems and challenges faced by market participants, and thoughts on a specialist social impact security trustee service.
4.1 Current landscape
4.1.1 Orientation questions
We asked:
What comes to mind when you think about social investments that have involved a security trustee? Can you share a specific example or two?
- Follow-up: What was your role or your organisation’s role in that specific investment?
- Follow-up: Are you aware of any deals that didn’t go ahead because of problems with appointing or paying for a security trustee?
The interviewees fell into three primary categories: social investors who often find themselves forced into the role of security trustee; investees who implicitly or explicitly pay for the service; and technical experts who manage the legal or insolvency aspects.
4.1.1.2 The Investee (The Borrower)
This participant represented the borrower’s perspective. They highlighted the high cost of commercial trustees and note that their senior lender (a bank) acted as the trustee because a specific employee “had the knowledge,” but upon that employee’s retirement, “the knowledge… is not there any more”.
4.1.1.3 The Technical Experts
- One provided a regulatory perspective, noting that their organisation has acted as a security trustee in investments alongside “small foundations… because it just wouldn’t be feasible” for smaller players to fulfil the role.
- The other, who specialises in restructuring. They observed that commercial security trustees are often “paralyzed with indecision” because they lack expertise in the specific social investment context and fear liability.
4.1.1.4 Lack of a security trustee?
None of the interviewees could identify a specific deal that failed solely because a security trustee could not be appointed. One participant noted that they had had a lucky escape, as a security trustee would have added £150,000 to the cost of a deal that would not have been able to bear it. Outside of the interviews, we are aware of a deal where one investor would not go ahead without a security trustee, but the others were unwilling to take give up the cost to pay for one; although the deal did happen, it was at smaller size thst it would otherwise have been.
4.1.2 Security trustee involvement
We asked:
In examples you’ve seen, has the security trustee been involved prior during the life of the transaction – when things were going well with the investment? What sort of involvement? Was it what you would have hoped for?
What about when things have started to go wrong, if you have an example? Has their involvement been as expected? Did you want them to do more or less, or do things differently? Or was it great as it was…?
- Follow-up: You gave an example where things went [well/badly] – do you have another example where things went [the other way]?
The interviewees described the involvement of security trustees as shifting dramatically between the “quiet” phases of an investment and the “distressed” phases.
4.1.2.1 During the life of the transaction - when things are going well
Interviewees generally described the security trustee role during the “good times” as largely invisible, administrative, or “academic.”
- Just an invoice: Several investors noted that commercial security trustees had almost no active role when investments were performing. An investor noted that a commercial trustee was merely “submitting invoices for its fee” and completing basic paperwork. An investee echoed this, stating that their security trustee “sit there, and that’s it”, although they noted that the setup process involving them was “extremely time-consuming” and expensive.
- Purely academic: Another investor explained that their organisation took on the security trustee role almost casually, viewing it as “broadly… academic” and purely a requirement to get the deal done, without expecting the role to ever “come into force”.
- When the security trustee was also a fellow social investor, the involvement was viewed differently. One investor observed that this arrangement felt “healthier” because the security trustee “understand[s] the other investors and what their intentions are,” rather than being “just a name in the legals and an invoice”.
- One of the technical experts noted that in successful deals, the security trustee’s only real involvement was the mechanical task of releasing security when underlying investments were realised.
4.1.2.2 When things start to go wrong
When investments faced difficulties, the experience varied significantly depending on whether the trustee was a commercial entity or a mission-aligned social investor.
- Commercial “Paralysis”: The technical expert offered a critical view of commercial trustees in distressed situations, describing them as often “paralyzed with indecision.” He noted they frequently refuse to make decisions without explicit instruction or “run to the hills for an advisor,” adding significant costs for work that should be under their remit,.
- The “Double Cost” Problem: An investor expressed frustration that even when a security trustee was in place, investors often had to hire independent consultants to manage the situation anyway. He explained, “you sort of hope that you wouldn’t have to, because that’s basically the security trustee’s job,” resulting in a “double cost” for the investors.
- The “Active” Social Investor: Conversely, when a social investor acted as the trustee, they were often highly proactive. An investor described his approach in distressed scenarios as seeking to “convene, an outcome that was good for us” and acting far more proactively than an independent agent to find solutions. Another investor praised this approach in a specific deal, noting the security trustee did significant work to “convene investors to consider options” before insolvency occurred.
- Conflict and Burden: However, for the social investors forced into this role, the experience was often negative. A investor who has acted as a security trustee described their experience as “hard work” and “messy,” noting that they felt a conflict between representing their own organisation and the wider investor group. Another stated, “They admitted,”We are the worst people to do this job ourselves, probably.”
Participants provided specific examples comparing different deals or providers to highlight how the security trustee experience can vary. We group these into “Went well”, “Neutral”, and “Went badly” categories:
Went well:
- The interviewee described a situation where their organisation was the senior lender and security trustee. Because they had “significant exposure” and “skin in the game,” they were proactive in managing the distress and trying to create a “softer landing” for the investee
- A technical expert has examples of commercial providers who were “sensible” or have “restructuring teams” that allow for “cross-pollination” of skills, making them effective in complex situations
- An investor praised another investor who took a security trustee role because the “ethos for the work” was different—they sought to protect investors without maximizing commercial return at the expense of impact
Neutral:
- An investor cited a deal where they were a junior lender and security trustee. When it became clear they wouldn’t make a recovery, they decided “there just wasn’t any point” in devoting time to it. They told the borrower they would have to start charging fees or the borrower should find a commercial trustee, noting, “we can’t cover our costs from this loan… we’ll need to charge for the role”
- An investor felt that in one deal, with a commercial security trustee, that while they were not impact-oriented and would likely have taken a “straightforward commercial perspective,” the investors were not concerned because the deal structure was simple and they did not expect to need to call on the services
Went badly:
- One interviewee described a commercial security trustee, saying they were “a bit of a pain to deal with” because they “won’t make a decision” and wait for advisors to tell them what to do
4.1.3 Conflicts of interest
We asked:
Have you ever felt that the security trustee was in a position of tension or conflict?
- Did they have a position where there might have been a conflict of interest (e.g. because they were an investor and a security trustee)? How did that play out?
- Did they ever act in a way that required them to balance matters of impact and finance? Or where there was an opportunity to do this, even if they didn’t? Can you explain?
Interviewees generally agreed that holding the role of security trustee while simultaneously being an investor creates significant potential for conflict, though experiences of how this played out varied.
- One interviewee, who acted as both investor and security trustee, described feeling “absolutely” in a position of conflict during a distressed deal. They noted that as the situation deteriorated, the relationship between the parties fractured, and it became increasingly difficult to represent their own organisation’s views as an investor while holding the neutral position of security trustee. They admitted, “it did feel like, increasingly, I couldn’t represent [my organisation] and be the security trustee on equal footing”. *Another investor acknowledged that when a lender acts as the security agent, they are by definition interested in one specific piece of the debt. They noted that the organisation has a “strategic interest to do what it can… around that part of the debt stack,” meaning they are not truly an independent agent
- An investor observed that while they had not personally seen the conflict play out, it is a “major source of potential tension.” They noted that if an investor acts as trustee, they will inevitably represent their own interests alongside the group’s.
- Another added that in their specific examples, the conflict did not compromise the outcome because the “credit ranking was clear” and the effort felt collaborative rather than competitive.
- One of the technical experts argued that independent trustees are often preferred specifically to avoid this issue. They noted that independent agents “don’t have a conflict… [and] will… be sometimes a little bit more pragmatic” regarding waivers or undertakings, whereas commercial banks that sold the debt but kept the trustee role often act “under sufferance”
The tension between maximizing financial recovery and preserving social impact (e.g., housing for vulnerable people) was a central theme. Interviewees described situations where they had to make “horrible decisions” or negotiate with commercial entities that did not understand social value.
- An investor security trustee explained that while they have a fiduciary duty to return capital to investors, they actively try to “create a softer landing” for distressed organisations. They aim to limit the impact on employees or services before insolvency occurs, which an independent commercial agent might not do.
- Another recounted being reprimanded by solicitors for being “way too nice” during a distressed deal. The investors had agreed to repayment holidays to try to save the social impact, but the legal advice was that this generosity had delayed the inevitable and that they should have “locked it down much quicker.” The interviewee admitted they were looking at the situation “too much through the social lens” when the financial reality was already terminal.
- An investor highlighted the ethical difficulty of enforcing security on property used to house vulnerable people. They stated that the “number one priority” is protecting those people, even before financial recovery, but acknowledged this is a “really difficult situation” involving tension between different investors’ risk appetites.
- Another interviewee expressed worry that a strictly commercial trustee would prioritize a quick sale over a transition plan for vulnerable tenants. They feared a commercial agent “will make more money by not having that conversation” about impact
- The technical expert noted that a commercial security trustee’s duty is strictly to “maximise value”. They explained that a security trustee would likely expose themselves to liability if they proactively suggested a lower financial return to save social impact. To prioritize impact over finance, the trustee would need “explicit direction” from the lenders to protect themselves from dissenters suing for the loss of value.
4.2 Core problems and challenges
We asked all interviewees:
Security trustees can serve a purely mechanical function, yet are often expected to do more than this. What are your observations on what they would ideally do?
There was a strong consensus that while the commercial reality of a security trustee is often “logistical” or “mechanical”, the ideal security trustee in the social investment market would function as a proactive convener, diplomat, and impact guardian.
Here are the key observations on what a security trustee would ideally do:
- Act as a diplomat and convener - The most frequently cited ideal function is that of a mediator who coordinates the various stakeholders.
- Be proactive rather than “paralyzed” - Interviewees contrasted the ideal behaviour with the current reality of commercial trustees who are often “paralyzed with indecision” and “run to the hills for an advisor” when difficulties arise. One investor described the ideal skills as: having a “can-do attitude” and being prepared to “roll their sleeves up and be proactive in terms of finding solutions”. A technical expert noted that when a borrower asks for concessions or indulgences, the security trustee needs to take a role in recommending a course of action, rather than waiting passively for instructions.
- Provide “impact-aligned” guidance - Ideally, the security trustee would understand the “dual aim” of the investors (financial return and social impact) without needing to be educated during a crisis. Examples included hopes that a security trustee would not just houses with vulnerable tenants but agree on “transition plans” for them (e.g., a 6-month plan) to avoid immediate homelessness. Another interviewee believed an ideal security trustee would approach issues from a starting point that understands investors’ priorities, helping to “balance impact investors’ priorities appropriately” and manage reputational issues.
- Educational support for investors - Because many social investors are not technical experts in restructuring or insolvency, the ideal security trustee acts as a knowledgeable guide. One investor emphasized the need for “clarity of kindly communications,” supporting investors who have different degrees of financial fluency. Another observed that investors often do not understand the role of a security trustee until it is too late; an ideal trustee would be “approachable” and able to explain legal implications to the group.
- Restructuring expertise - For one interviewee, the ideal trustee would not just be an administrative cost, but should instead bring forward ideas to save the business, rather than just being someone you pay to “do nothing” until a disaster strikes.
For investors we followed up with:
- From your perspective as an investor, what are the key areas where you feel security trustee services could be improved to better meet the specific needs of impact-led investments?
- How might a dedicated security trustee service, focused on the values and needs of the UK social investment market, influence your organisation’s willingness or approach to making secured social investments?
Investors identified several critical areas where current security trustee services fall short and where a specialized service could offer significant improvements:
- A major friction point is the cost model. One investor noted that the mainstream market is built for much larger deal sizes (e.g., £3-10 million), whereas social investment deals are often smaller (e.g., £1 million). Adding a commercial security agent’s fees to these smaller transactions makes them financially unviable. Another interviewee agreed that cost is a “huge issue” for investees when structuring deals. Ideally, a service would prevent investors from having to take on the role “for free” while remaining affordable.
- Investors said they want a trustee who understands the “dual aim” of the sector—financial return and social impact—without needing to be educated during a crisis. One emphasized that a security trustee should understand the “principles behind this deal” rather than just “ruthlessly trying to force us to the front of the asset recovery queue”. Another echoed this, calling for a service that is “impact favourable or impact sympathetic,” avoiding the standard commercial perspective that maximizes return at the expense of impact.
The consensus among the interviewed investors is that while a dedicated service would remove significant friction, it is unlikely to be the sole determinant for entering into secured investments.
- Most investors view a specialized service as a solution to an annoyance rather than a prerequisite for investing. One described it as a “very nice to have,” but stated it “wouldn’t sway us whether we would or wouldn’t invest,” noting they have previously used commercial providers despite them not being impact-oriented. Another agreed, calling the current lack of a specialist service a “pain point, but it’s not a deal-breaker”.
- While established investors might cope without it, one investor suggested that a specialized service could be crucial for bringing in new social investors, e.g. smaller foundations, into the market. He views it as a way to help these organizations engage in property-backed, high-impact deals by removing the barrier of navigating complex legal roles they do not understand.
- One observation was that some funds now prefer to be sole lenders, precisely because of the pain of working in multi-party transactions. However, they acknowledged that for the wider market, finding a credible alternative to investors taking the role themselves is necessary if syndicated deals are to continue.
- A point of caution was mentioned by one investor: as fewer social investors are willing to take on the trustee role today due to the “onerous responsibility” involved, a specialized service is essential simply to “boost capacity” and ensure that deals do not stall because no one is willing or able to hold the security.
For investees, we asked:
- As an investee, how have your interactions with security trustees, or the knowledge that one was involved, affected your organisation’s operations or strategic decisions?
- What are your thoughts on how a security trustee service could be structured or operated to be more supportive of investee organisations and their social missions, especially in difficult times?
The most significant impact cited was financial: the cost of engaging a commercial security trustee is prohibitive, and so that forces alternative solutions. They went on to say that due to the goodwill of their investors, they have been able to manage, but that may not always be the case.
Another issue raised for property-backed investements was that the process of satisfying the security requirements (surveys, valuations, legal searches) was “extremely time-consuming” and expensive.
The investee expressed a clear desire for a service that prioritizes “impact protection” over purely mechanical asset recovery, particularly regarding vulnerable beneficiaries.
When presented with options, one interviewee “definitely” preferred a model “embedded in the social sector” or owned by it, rather than a commercial entity, believing this would ensure they “care about their clients”.
And we asked advisors and intermediaries:
- In your professional capacity working with impact organisations, have you observed anything that makes you think that a specialized security trustee service would have an advantage over a generic commercial service?
- What specific features or approaches would you recommend for a dedicated security trustee service that services the social impact sector?
The advisors and intermediaries echoed many of the points above around, alignment, balance and cost. In addition, they highlighted:
- Independent trustees—as opposed to banks holding the role “under sufferance”—tended to be “more pragmatic” when dealing with waivers or undertakings
- The importance of independence to avoid conflicts of interest. One noted that when a lender also holds the trustee role, they are often conflicted, whereas an independent agent avoids “implied conflict of interest” and can facilitate decision-making more effectively.
- That a significant issue was the use of “defective security trustee agreements” based on old templates. They recommended that a specialized service must ensure documentation is fit for purpose and looks at the “nuances of actually the structure,” rather than using generic “sweet pitch” templates
- One interviewee drew a parallel to an insolvency practitioner they had worked with who was “very impact-aligned.” They noted that this focus helped reach solutions that satisfied impact-focused stakeholders, suggesting a security trustee should emulate this approach.
4.3 Specialist social impact security trustee service
4.3.1 Qualities and skills needed
We asked:
Thinking about what you’ve experienced and your ideas, what are the most important qualities or skills a special security trustee service for the UK social investment market would need to have to work well and be valuable? Think about things that would make you want to choose them as a security trustee.
When asked what qualities would make a specialist security trustee valuable, interviewees prioritized a combination of technical competence, diplomacy, and sector-specific empathy, all of which have been discussed previously. The key additional point was that despite the need for soft skills, technical rigour remained essential. A technical expery noted that the security trustee must ensure documentation is not merely a “template” but fit for (social) purpose. An investor echoed this, stating the trustee must be “professional at doing what the documentation tells them”.
4.3.3 Governance and operational model
We asked:
Thinking now about governance and operational model – would you want it embedded in the sector, perhaps even owned by the sector at large, or would you want it more distant and independent? Or something else?
Views on the ideal structure were mixed, with a general preference for independence over sector ownership to avoid conflicts of interest.
- Embedded vs. Independent: An investee expressed a strong preference for a model “embedded in the social sector” or owned by it, believing this would ensure the provider cared about the clients. Conversely, an investor argued that independence was preferable to avoid “unintended conflict of interest,” suggesting a privately owned specialist would be better than one owned by a sector body like Better Society Capital.
- Lack of appetite for ownership: Several interviewees noted that trusts and foundations generally do not like owning operating businesses. One stated they did not think there was “appetite” for the sector to own the service, viewing it as a problem that was “not big enough” to warrant such an intervention.
- Hybrid approach: One interviewee suggested a middle ground: an entity that was independent (to maintain commercial rigour) but driven by knowledge of the sector’s motivations. Another suggested a simple “memorandum of understanding” between frequent co-investors might suffice in place of a formal entity
4.3.4 Cost model
We asked:
Security trustees typically have little work to do until something goes wrong – and then it can be a lot of work. Do you feel that it would be better to have a steady fee that runs through the whole deal, or for charges to flex dynamically – low costs when things are going well, with escalating costs when there is a problem?
Interviewees largely favoured a steady “insurance-style” fee to avoid compounding financial distress, though some were open to hybrid models.
- The “insurance” model: An investor argued that a steady fee was “fairer” and safer. They noted that a dynamic model—where costs escalate when things go wrong—would “compound the risk” and potentially affect decision-making during a crisis.
- The “gold package” hybrid: One interviewee suggested a model similar to an extended car warranty: a flat rate for the standard mechanical role, with clear boundaries where the service could escalate to an “enhanced” or “gold package” fee if significant extra work (like mediation) was required.
- Cash flow concerns: An investee argued that ongoing fees reduce impact while the organization is healthy. They preferred a model where costs were “deducted from the final amounts” during a recovery event, rather than draining operational cash flow.
- Commercial viability: An investor noted that the mainstream market struggles to make security trustee economics work on small deal sizes (e.g., under £1 million), making any fee structure difficult to justify without grant subsidy or aggregation
4.3.5 Market demand
We asked:
Do you think fixing problems with security trustees actually matters to the social investment sector, or is it just too boring for people to care about?
The consensus was that while the issue is a “pain point,” it is often viewed as a niche operational annoyance rather than a strategic priority:
- A “Nice to have”: One investor described the solution as a “very nice to have,” but admitted it would not be a “deal-breaker” that determined whether they invested or not,.
- Lack of awareness: An investee noted that the sector suffers from a “lack of understanding” about what a security trustee actually does, suggesting that many people do not know enough to care until it is too late,.
- A barrier for new entrants: While experienced investors might cope without it, one interviewee noted that a specialist service could help bring new investors (like smaller foundations) into the market by removing the complexity of legal roles they do not understand.
- Declining relevance for some: One investor observed that because syndicated deals have proven so difficult (“too many cooks”), there are now funds that avoid them entirely. They wondered if therefore, the issue had become “academic”. (We would suggest this this is precisely why a specialist service is needed to enable syndicated deals to continue.)
4.1.1.1 Social investors - the reluctant security trustees
A significant portion of the interviewees were investment directors or managers at major social impact funds and foundations. Their organisations often take on the security trustee role not by choice, but out of necessity to save costs or because commercial options don’t seem to be a good fit.