In today’s UK Spring Budget, chancellor of the exchequer Jeremy Hunt announced that the British Business Bank will award £250m to Schroders and Intermediate Capital Group (ICG) under the Long-Term Investment for Technology and Science (LIFTS) initiative.
The competition was announced by the chancellor in his Autumn Statement.
The LIFTS initiative will aim to create two new investment vehicles that are accessible to pension fund capital.
As part of the initiative, Schroders’ specialist private markets investment division has been awarded £150m by the British Business Bank to invest into UK science and tech companies, while ICG was awarded £100m to invest into the UK’s most innovative life sciences companies, it was announced.
This will be supported by pensions capital from Phoenix Group, and together with £250m from the government, Hunt expects this will generate “over a billion pounds of investment into UK science and technology companies.
Shroders’s LTAF
Shroders said it plans to launch a UK venture and growth Long-Term Asset Fund (LTAF), subject to regulatory approval, seeded with a cornerstone investment of £300m and open to third party investors.
The LTAF will aim to stimulate the UK venture capital ecosystem by mobilising institutional investment into UK technology and life science companies. It will seek to provide institutional investors with opportunities to invest long term, through private markets as well as public, into early-stage growth businesses.
It has the potential to realise significant value for both investors and for the UK economy, the firm said.
Peter Harrison, group chief executive officer of Schroders, said: ”It is a privilege to have been selected by the [British Business Bank] to invest these assets into the UK’s leading science and tech start-ups enabling a broader pool of UK investors to benefit from the returns these assets can deliver.”
He added that the UK is one of the “most innovative countries in the world punching above its weight in many sectors”, including science and technology innovation, and, therefore, it is “critical” that the UK increases investment in these sectors.
“A UK venture and growth LTAF will act as a catalyst to unlock institutional investment, particularly from UK defined contribution pension schemes, and increase the supply of capital to UK technology and science start-ups,” he said.
Harrison noted that this initiative will ultimately “strengthen UK economic growth and reinforce the UK’s position as the natural home for fast-growing companies”.
ICG’s life sciences team
ICG said that investment into innovative life sciences companies under the LIFTS initiative will be made by ICG’s dedicated life sciences team.
Based in London, the core team has worked together since 2018 and combines both extensive investment experience as well as a deep operational focus. All team members have worked in the pharmaceutical industry, and four of them have been CEOs of biotech companies.
The team has also been involved in over 120 drug discovery and development programmes, and has taken 25 products to market.
Benoît Durteste, CEO and chief investment officer of ICG, said that the contract award aligns with ICG’s longer-term ambition to be the “premier” European life sciences investor.
“As a UK headquartered global alternative asset manager with over 35 years of experience, we fully support this initiative to unlock UK institutional pension capital and catalyse investment into science and technology,” he noted.
Commenting on matching the funding for Schroders and ICG, Andy Briggs, CEO of Phoenix Group, said that currently, the UK lags “significantly behind” comparable international markets (P7: Australia, Canada, Japan, Netherlands, Switzerland, UK and US), which typically invest 20% of their pensions in private market assets, compared to 14% in the UK, with the UK remaining the lowest allocating country to private markets within the P7.
He said that the LIFTS initiative will provide the sector with more opportunities to yield “stable, patient capital” to the UK’s most innovative businesses to accelerate their growth, whilst delivering potential higher returns.
“We will continue to work with all stakeholders to deliver a successful outcome with customer protection remaining at its core,” Briggs added.
Louis Taylor, CEO of the British Business Bank, said: “Long-Term Investment for Technology and Science is a potentially game-changing initiative. With the intention of catalysing more than £1bn of funding, including from UK pension funds, LIFTS will support the growth and ambitions of the UK’s most innovative science and technology companies, which with the right finance and support can become the world-beating businesses of tomorrow.”
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