government-backed Fund seeks £20m to back english firms
A venture capital fund investing in the most deprived areas of England is being opened up to high net worth individuals for a minimum investment of £100,000.
The Bridges Community Development Venture Fund carries no tax incentives but its structure gives downside protection to investors. It is looking to raise £20m from institutions and high net worth individuals and the money raised will be matched by the Government.
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%pa.
Michelle Giddens, a director of the fund, said: 'This subordinated Government fund aims to reduce risk and enhance returns for investors.'
The lifetime of the fund is 10 years but the group is looking to establish exit options after five. 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 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. He added: 'This fund is unregulated and we are not aiming to sell it to anyone other than experienced investors.'
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