According to Preqin’s Funds in Market online service, there are currently 60 funds which focus solely on providing investments to UK-based companies. These funds are collectively targeting just under €17bn in commitments, a figure which represents over a third (38%) of the total capital being raised by funds that include the UK as part of a wider geographic focus.
Among the funds exclusively targeting UK-based businesses, the aggregate target sizes of the traditionally most predominant private equity fund strategies of buyout (€531mn) and venture capital (€454mn) falls well behind its real estate (€9bn) and infrastructure (€5bn) counterparts. In fact, buyout and venture capital funds represent only 6% of the €17bn that UK-focused firms with a fund in market are seeking to raise. Of these solely UK-focused buyout and venture capital funds, half of them include technology and IT infrastructure in their industry focuses and are mostly being managed by UK-based fund managers. Interestingly, UK-focused distressed private equity (encompassing distressed debt, special situations and turnaround strategy) funds currently in market are collectively aiming to raise a substantial €1bn in commitments which is the third most popular strategy focused on the UK market.
The largest buyout fund that is on the fundraising trail and invests solely in UK businesses is RJD Private Equity Fund III. This vehicle aims to raise £150mn for investment into the consumer services sector, as well as the leisure industry and is marketing at the same target size as its predecessor, the RJD Private Equity Fund II, which closed in 2007 at a higher amount of £179mn.
Looking at the venture capital side, Dawn Capital II is the largest fund to focus on the UK Technology, Media and Telecoms (TMT) industry and is seeking to raise £70mn. The fund held a first close in July 2013 and intends to deploy the accumulated capital to back technological entrepreneurs seeking to create and revolutionize existing markets.
As it stands, there are only two private equity funds in market seeking to provide growth capital to UK-based companies; one from a Swiss-based LGT Venture Philanthropy, and one from UK-headquartered Clarent Capital. Impact Ventures UK, managed by LGT Venture Philanthropy, launched in partnership with German private bank Berenberg in 2013 and is seeking £30mn to invest in social enterprises. The fund considers small and medium-sized businesses that promote innovative market-based solutions to improve the quality of life of disadvantaged people. The fund will make full use of this year’s UK budget changes which allow investors a 30% income tax relief for investing in social enterprise; a strategy we may see funds employ more in the future to take advantage of this change. The other fund, Clarent Capital PE Fund 1, is targeting more than three times the size of LGT Venture Philanthropy at £102mn, and was set up to specifically invest in media and technology companies. This fund is the only technology-investing, UK-focused vehicle that commits growth equity to target opportunities, whereas 71% of the solely UK-investing venture capital funds plan to invest in technology as part of a wider industry focus.