Fostering News: Concern at venture capitalists who make millions out of children in care

Private equity firms are making huge profits from the care of damaged children in the UK care system, with one fund making a return of more than 500 per cent in only six years, The Times has found.

Wealthy global investors have bought out smaller care homes and fostering services, leading to accusations that standards are being sacrificed under the guise of efficiency savings.

The head of a leading children’s charity last night questioned the logic of a few large companies playing such a dominant role in the care of vulnerable young teenagers, asking whether it was morally “right for venture capitalists to profit from children who’ve been abused and neglected”.

Local authorities placing children in a private home pay average annual fees of £200,000 per child. Some private investors maximise their returns by clustering homes in deprived areas of north-west England and the West Midlands, where property prices are low.

Companies can further increase the fees they charge by registering a property as both a children’s home and a private boarding school. Every year hundreds of troubled children are sent from the south of England to care homes across the country, despite guidelines suggesting this should be done only in exceptional circumstances and experts saying the practice increases the risk of teenagers falling prey to sexual predators.

Kevin Williams, the chief executive of TACT (The Adolescent and Children’s Trust), Britain’s largest fostering and adoption charity, said that huge sums of money were passing from local authority children’s services budgets “into the pockets of global venture capitalists”.

“There’s a moral question about people making large sums of money from children who’ve suffered abuse and neglect,” he said. “If they do profit from such children, can they demonstrate that they’re delivering the best possible outcomes for those children and not simply making money through efficiency savings, by increasing workloads and reducing training and support? I would question whether they can.”

England’s biggest operator of children’s homes, Advanced Childcare, with 143 homes and 1,400 staff, was purchased last year by GI Partners, an American private equity house, from another private equity firm, Bowmark Capital. In April, Advanced Childcare, whose head office is in Stockport, Greater Manchester, bought Continuum Care and Education, previously owned by 3i, also a private equity firm.

The 15-year-old girl who was at the centre of a recent sex-grooming trial that ended with nine convictions was sent from Essex to live in a Continuum home in Rochdale, Greater Manchester.

Two of England’s three biggest private providers of foster placements are owned by private equity firms.

London-based Sovereign Capital bought the National Fostering Agency in 2006 and sold it this year to Graphite Capital for £130 million, tripling its original investment.

Acorn Care and Education, which owns Fostering Solutions, was purchased from a private equity firm for £150 million in 2010 by Teachers’ Private Capital, the direct investment division of a Canadian teachers’ pension fund.

Castlecare, which runs 40 children’s homes from headquarters in Rothwell, Northamptonshire, was bought by Baird Capital Partners Europe for £9 million in 2004. The company has expanded by buying two smaller childcare companies, Quantum Care and Sovereign Care, for £1 million and £1.3 million respectively. In 2009, Castlecare charged annual fees of £378,000 for a place at one children’s home; another opened an independent school in a converted double garage.

The role of private equity in residential childcare was defended by Simon Havers, the chief executive of Baird, who said its investment ensured that “the young people in Castlecare homes receive first-class care from experienced, specialist staff”. “Castlecare provides care to young people with exceptionally challenging behaviour. Fees reflect the high level of specialist support that the individual young people need.”

Source: www.thetimes.co.uk