Hermes Private Equity and EIF secure UKIIF mandates

The UK Government is on course to create Europe’s largest technology venture capital fund. Hermes Private Equity and the European Investment Fund (EIF) have been appointed fund-of-funds managers for the UK Innovation Investment Fund (UKIIF) which has £150m backing from the UK government and has secured an additional £175m from investors creating a pool of capital worth £325m. The capital was raised in less than six months after the fund was launched. Further commitments are anticipated before the fund closes to investors in 2011 with the ambition of creating a £1bn 15 year fund.

The fund will start investing in early 2010. Capital is earmarked for innovative UK businesses in the life sciences, clean technology, digital and advanced manufacturing sectors.

In a statement, Lord Drayson, science & innovation minister, said: “UKIIF has been a hit with investors. We can now ensure that Britain’s high tech growth companies will have the capital to fulfil their potential.”

The intention to create the UKIIF was announced by Prime Minister Gordon Brown on 29 June, 2009 as part of the Government’s strategy for “Building Britain’s Future”. The UKIIF will operate through two fund-of-funds structures which means that it will not invest directly in companies, but rather in a small number of specialist technology funds that have the expertise and track record to invest directly in companies with high growth potential.

For one mandate, the UKIFF will commit £100m to a £200m technology fund-of-funds to be managed by the EIF, which will cover digital/ICT, life sciences and advanced manufacturing. The EIF is one of the largest investors in European venture capital, supporting both well-known and first time teams and has built a strong track record in the industry.

The second mandate is a £50m commitment in a £125m low-carbon and clean tech fund-of-funds to be managed by Hermes Private Equity. Hermes Private Equity has over £1.5bn assets under management in private equity funds and over £400m assets under management in infrastructure funds and direct deals. It annually commits up to £400m to primary funds from venture capital to large buyouts predominantly in the US, Europe and Asia. Hermes Private Equity is owned by Hermes Fund Managers, one of the most established and largest institutional fund managers in the UK with over £20.5bn under management.

Both mandates are subject to contract.