We reported in our last edition of VC Inform on the appointment of Hermes Private Equity and the European Investment Fund as the fund of fund managers allocated funding by the UK Government as part of the UK Innovation Investment Fund (UKIIF).
Launched on 29 June 2009, UKIIF is backed by a £150m investment by the Department for Business, Innovation and Skills, the Department of Energy and Climate Change and the Department of Health and has already attracted private investment to more than match this amount with the total first closing reaching £325m. The UKIIF funds will focus on investment in small businesses, start-ups and spin-outs (including those in pre-profit and pre-revenue stages of development) in the digital and life science, clean technology and advanced manufacturing sectors in the UK.
UKIIF officially got off the ground on 26 January 2010 with the first closing of the Hermes Private Equity Environmental Innovation Fund (HEIF) on 26 January 2010. Utilising £50m of UKIIF funding together with commitments of £75m from private sector investors from Hermes' existing client base, an initial £125m pool for investment has been created.
The press release published by Hermes confirms that HEIF's focus will be on investment opportunities aimed at increasing the efficient use of resources (both renewable and non renewable) at all stages of production and consumption, injecting much needed venture capital into innovative low carbon and clean tech businesses. HEIF will particularly focus on pooled investment funds that invest in UK opportunities, providing investors "with the opportunity to invest in both funds and co-investments in businesses with high growth potential, primarily focusing on the environmental sector".
Over the past decade, the UK has emerged as a European frontrunner in alternative energy investment. Recent figures published by the Carbon Trust show that the UK is now the sixth largest low carbon and environmental economy in the world with a 3.5% global market share (bringing annual economic benefits and investment to Britain of around £6-8 billion). Independent research conducted by Innovas in late 2009 revealed that the global market for low carbon and environmental goods and services could grow to an estimated £4.3 trillion by 2015 and HEIF will certainly look to benefit from this attractive market framework, expecting to commit its capital over the next 2-3 years.
The second fund of funds (of up to £200m) will be managed by the European Investment Fund and will be a generalist fund.
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