bridges community development venture fund to help disadvantaged
High net worth individuals will be able to invest in disadvantaged communities following the launch of the Bridges Community Development Venture Fund.
The fund will raise most of its target £20m from institutions but individuals with around £100,000 to invest can also participate. Money raised will be matched by the Government.
No tax incentives are offered to investors but the vehicle gives some measure of protection against losses.
Within the fund, 50% of the Government allocation will be structured as a 'subordinate' or 'junior' fund. This portion, which will equate to £10m if the Government's matching contribution is £20m, will be the first to incur losses. Returns on this part of the fund will be capped at 5%.
Michelle Giddens, a director of the fund, said: 'This subordinated Government fund aims to reduce risk and enhance returns for investors.'
The fund will invest only in businesses that regenerate local economies in the most deprived areas of England. These areas will be the bottom 25% listed in the Government's Index of Multiple Deprivation, which measures the wealth of different areas.
The areas are spread throughout England, including substantial parts of the Northwest, Northeast, Yorkshire and Cornwall. In London, Giddens said, the 25% of most deprived areas includes Hackney, Camden and Tower Hamlets.
The funds will be run as commercial operations by a newly-established management team of professional venture capitalists, operating on standard venture capital principles.
They will look to provide capital to businesses that will be successful and grow strongly, bringing deprived areas the growth-enhancing benefits of the venture capital model.
The businesses seeking investment need not necessarily be based in these areas. They could, for example, be based nearby but employ a number of staff from the area, or have a supply relationship with it.
The lifetime of the fund is 10 years but the group is looking to establish exit options after five. The Bridges Community Development Venture Fund has already raised £16.25m (£32.5m with the Government contribution).
Giddens, along with the fund's managing director Philip Newborough, is confident of achieving the target £20m.
Giddens said: 'This fund is unregulated and we are not aiming to sell it to anyone other than experienced investors.'
The fund is being launched as new figures from the British Venture Capital Association show a record rise of 24% in investments in UK start-up companies.
Community Development Venture funds were one of the main recommendations to come out of the Social Investment Task Force report in November 2000.
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