UMIP fund will close £10m under target

THE UMIP Premier Fund, launched last year to invest in Manchester University spin-outs, is to close at least £10m short of its original £50m target.

Set up by the University of Manchester Intellectual Property company, and run by technology investment company MTI, the fund announced its first close of £32m in April 2008, and its expected final close of £50m was widely reported.

But the economic downturn means the fund has since been downsized by at least £10m.

In UMIP’s latest annual accounts, chairman Peter Sanderson said UMIP intends to reach a fund size of £40m, with the remaining £8m required to be raised by March this year.

Ernie Richardson, managing partner for the fund at MTI, said the fund manager had always expected to raise between £40m and £50m, but that even the lower amount might be a stretch in the changed economic climate.

He told TheBusinessDesk: “Just when we thought fundraising couldn’t get more difficult, it is. It’s a nightmare.”

He added that the fund was “lucky” to reach its first close when it did.

“We got that and all the shutters went down. We certainly won’t get to £50m but we would like to see £40m. I still think there is a chance of getting there but in today’s market there are no guarantees.”

Mr Richardson admitted the March deadline does not leave long to find new investors. “But since first close people have come in and gone out of the frame. We are talking to investment managers who are dealing with write-offs in the tens of millions so they don’t devote much attention to a couple of million pounds for a spin-out fund in Manchester.”

He added that the fund, Europe’s largest institutional fund to have a single university focus, is still viable at £32m. Current investors include the European Investment Fund; National Endowment for Science Technology and the Arts; and the Co-operative Insurance Society. Once it is fully invested, it is expected to have a portfolio of around 20 investments.

“Our investors are aware of how difficult the fundraising environment is and remain supportive of our fund,” added Mr Richardson.

UMIP’s accounts show that for the year to the end of July 2008, the company awarded £721,000 to 15 projects. Four new spin-outs were created, three of which received investment from the proof of principle fund.

But Mr Sanderson added in his directors’ report that any new investments made at proof of principle stage would now be made through the UMIP Premier Fund.

The Manchester University subsidiary made an operating loss of £46,000 in 2008, compared with a profit £75,000 in 2007.

Bank interest of £45,500 reduced the overall pre-tax loss to £430, compared to the £102,500 profit made in 2007, when just £27,500 was received in bank interest.

Turnover was £4.05m – up 12% on £3.59m the previous year – and license income totalled £727,000 – a 53% on the previous year.

UMIP chairman Peter Sanderson said the figures show “a good overall performance” and added that the loss was principally driven by the level of funding received from the university.

He said a better measure for the company’s success, in terms of its commercialisation activities, is the profits made from the disposal of spin-outs. But in 2008, these disposals realised a net gain of £859,000, considerably less than the £4.5m net gain in 2007.