Simon Cunnington: Bringing in or supporting funds that are targeting that financing gap will really help demonstrate that those strong companies can grow and produce the impact.
Last April, Border to Coast Pensions Partnership launched its £500m UK opportunities strategy in a bid to direct long-term high-quality investment into productive finance – investing in areas such as housing, transport, energy and growth finance and supporting new building and development across the UK.
The pool – currently made up of 11 partner funds with around £65bn in assets – launched the strategy with an £80m commitment to energy transition and life sciences, investing £40m each in the UBS UK Life Sciences Property Strategy and the Quinbrook Renewables Impact Fund II.
The strategy has now made an additional two commitments – one into a direct lending fund and the second into a fund focussed on later stage UK life sciences companies.
Border to Coast said that, as part of this commitment, it would invest £24.3m into HSBC's UK Senior Direct Lending Fund II, a fund that focusses on high-growth SMEs across the UK, particularly those that have previously had private equity backing and are now looking for the next step in their growth and financing.
The pool said its commitment would enable loans to be provided to around 50 companies across the UK.
Border to Coast's said its latest commitment would also include an investment of £22.5m into the Advent Life Sciences Growth Fund – a move that will make it a significant investor in the £300m fund.
The pool said the Advent fund focused on later stage UK life sciences companies and was particularly focused on pharmaceuticals, vaccines, and medical devices companies.
It noted the investment would also have a social benefit as it would contribute to positive social outcomes such as improved health, longevity and disease prevention.
Border to Coast UK opportunities portfolio manager Simon Cunnington told Professional Pensions the pool's strategy hoped to provide a "strong foundation" for economic growth via infrastructure, with jobs creation as well as additionality and "strong risk adjusted returns".
‘Growth gap'
Cunnington explained the UK opportunities strategy would particularly help so-called ‘growth gap' companies – firms typically in the £20m to £50m size range that want to grow but struggle to find financing.
He said: "The UK has a huge market for both in private equity and private credit, and a large number of innovative companies, but there is generally a recognized funding gap for the earliest stage and for growth stage companies."
Cunnington said such firms often had to "look overseas for support and for financing".
He said Border to Coast's UK opportunities strategy aims to plug the growth gap by supporting ventures at an early stage – support he said contributes to "jobs, innovation and real impact to all of us, including the hundreds of Local Government Pension Scheme members that we are supporting".
Cunnington explained: "Bringing in or supporting funds that are targeting that financing gap will not solve the problem, but it will really help demonstrate that those strong companies can, with the support, grow and produce the impact."
