Six firms appointed to run £185m NW business loan fund

SIX fund managers have today been appointed to run the long-awaited £185m Venture Capital and Loan Fund.

The evergreen fund for North West businesses, now renamed The North West Fund, will be one of the largest public sector funds of its kind in Europe and the largest in the UK.

The North West Fund is the umbrella name for the six funds that will be available to businesses in the form of debt, equity and quasi-equity.

The NWDA has set up a new holding company for the European Union-backed fund, called Northwest Business Finance, to handle the scheme and fund managers.

The six funds are:

• £45m Development Capital Fund, to be managed by Leeds-headquartered YFM Private Equity
• £35m Business Loan Fund, managed by Newcastle-based FW Capital
• £30m Venture Capital Fund, managed by Preston-based Enterprise Ventures
• £25m Biomedical Fund, to be managed by London-based Spark Impact
• £20m Energy and Environmental Fund, managed by CT Investment Partners, part of the Carbon Trust Group
• £15m Digital and Creative Fund, to be run by AXM Venture Capital, based in London.

All £185m will be invested by the end of December 2015, however, a  pot of £15m will be held back by Northwest Business Finance, to be allocated to or split between the existing funds at a later date.

Andy Leach, chief executive of North West Business Finance, told TheBusinessDesk: “We’ve reserved the last 10% to allocate as we see fit once we see how the market is doing. It gives us an opportunity to test the waters before we spend all the money.

“If there is greater demand in a specific sector then we will give that fund more.”

Of the six funds, four do not currently have offices in the North West region but all will be setting at least one up to help manage the fund.

FW Capital, which has the second largest fund at £35m, will be setting up three new offices in the North West, CT Investment Partners and AXM will each set up two regional offices and Spark Impact will have one.

Mr Leach said: “All these funds are known in the marketplace and some may already have some investment activities in the North West but not had an office here.”

He added: ““The priority sectors want to bring in specialist expertise from outside the region, if that expertise is retained in London, its good these people are establishing bases in the North West.”

He said that it was not a condition of winning the fund that the companies set up offices in the region, but added: “Had they not, we’d have questioned their commitment. They need to be on the ground.”

He also said the fund managers had committed to remaining in the region beyond the 2015 investment stage, through to the realisation stage.

“It will be until 2022 to harvest those investments,” he said.

Mr Leach also revealed that additional future funding could come from the realisation of assets from the NWDA’s existing investments through the likes of its Rising Stars Growth Fund and Seed Fund.

“We hope the realisation of those evergreen investments will be reinvested back into the new fund,” he said.

“Our intention is for us to have more legacy money to support the fund beyond 2015.”

The fund – originally to be a large pot controlled by fund manager investing across the four areas of loans, mezzanine, equity and seed funding – was expected to launch early last year but became mired in bureaucracy.

The newly structured fund will now launch in late July or early August, with investments being made from September.

“By splitting it this way, we are managing six mangers but hopefully we have the right, specific managers for the expertise needed in specific sectors,” said Mr Leach.

The North West Fund is made up of a £92.4m ERDF grant, and a £92.4m loan which is expected from the EIB. In addition, the six fund managers have been targeted with securing more than £200m of co-investment capital from sources including finance angels, banks, pension funds, venture capital, private equity investors, and other private funds.  It is expected that this initiative will generate total funding of more than £400m.

The NWDA said it expects the fund to create or safeguard almost 14,000 jobs and improve GVA in the region by an estimated £700m.