A £2.5bn ($4bn) corporate venturing fund backed by the UK’s six biggest banks has hired its chairman and chief executive ahead of investing up to 75 companies per year.
The Business Growth Fund will be chaired by Sir Nigel Rudd (pictured), also chairman of airports operator BAA, and managed by Stephen Welton, managing partner of investment bank JP Morgan’s former leveraged buyout manager CCMP Capital, as chief executive.
The fund will start investing £2m to £10m in companies with an annual turnover of between £10m and £100m in April. The fund, which is backed by Barclays, HSBC, Lloyds, Royal Bank of Scotland, Santander and Standard Chartered, will take between 10% and nearly 50% of the portfolio company in return for its investment held over an expected five-year period.
Sir Nigel told news provider Financial Times: "If we invested, we would want a seat on the board – that would be a prerequisite. I hope we can make 15% per annum [year] but the days when private equity firms would make 30% internal rates of return, that’s for the birds.
"For too long in this country small companies have relied on bank finance. The government is saying banks should lend more and more but that is a very bad way to finance a business."
The fund has increased in size from its original plan. Former UK Chancellor of the Exchequer Alastair Darling had hoped to raise a £500m fund before the change of government, when the pot was increased in October to £1.5bn to be invested over several years. The extra £1bn has come as part of renewed pressure on the banks following larger profits.
The October plan was to invest £350m over two years with the remainder by 2020.