The British Business Bank today announced a call for proposals in preparation for the launch of the Long-term Investment for Technology and Science (LIFTS) initiative. It seeks proposals for the establishment of new funds or investment structures to crowd in institutional investment, particularly from UK Defined Contribution (DC) pension schemes, that can support the growth and ambitions of the UK’s most innovative science and technology companies.
We expect an initial government-funded commitment of up to £250m to be available to support successful proposals in mobilising institutional investment into the UK’s science and technology companies. The Bank now invites proposals from DC pension schemes (or consortia) and authorised asset managers where there is at least one UK DC pension scheme willing to support the proposal and invest.
Typically, DC pension schemes invest in listed assets, such as equities and bonds, and passive strategies, which are easier and cheaper to manage and trade. Many of the most innovative and highest growth companies are not publicly listed but instead receive their funding from private venture capital and growth equity funds.
With DC pension schemes currently only investing a small amount in alternative assets such as venture capital, a 2019 study by the British Business Bank and Oliver Wyman, concluded that pension savers may be missing out on opportunities for better returns. These low allocations have historically been due to the regulatory, commercial and operational environment in which DC pension schemes operate.
Long-term Investment for Technology and Science (LIFTS)
About LIFTS
What is the purpose of LIFTS?
The UK economy possesses a rich pool of assets in the venture and growth equity space that are ripe for long-term investment. The Government wants to unlock and mobilise the UK’s institutional capital, in particular DC pension schemes, to allow UK investors to benefit from the fruits of UK enterprise. This policy will bring investors together with asset managers, along with the UK Government, to establish innovative funds or investment structures to invest in UK businesses, helping our highest-potential, innovative businesses accelerate their growth while allowing UK savers to potentially benefit from higher returns.
Who can apply for LIFTS?
The Call for Proposals invites managed fund proposals from DC pension schemes (or consortia) and authorised asset managers where there is at least one UK DC scheme willing to support the proposal and invest.
What should I do if I am unsure about my eligibility status?
Please refer to the LIFTS Call for Proposals for details on eligibility. If you are still unsure, please contact the BBB at LIFTS@british-business-bank.co.uk.
What happens if the assessment criteria are not met?
BBB will assess proposals in accordance with the assessment process detailed in the Call for Proposals. The assessment process has been designed to enable BBB to select proposals that are considered to offer the best overall value for money in promoting the objectives and meeting the assessment criteria of the LIFTS initiative as set out in the Call for Proposals.
What form will government support take in LIFTS?
BBB expects an initial government-funded commitment of up to £250m to be available to support successful proposals. Proposals should demonstrate how the LIFTS funding would be used in their response to the Call for Proposals. The British Business Bank has outlined the available support levers.
Is LIFTS targeting specific sectors?
We will not require proposals to target specific sectors of the economy, though we will welcome proposals that seek to increase investment in our most innovative science and technology businesses.
Applicants should provide detail of the sectors and sub-sectors they intend to invest in as part of their applications. As outlined in the Call for Proposals, we expect proposals to commit to having a significant focus on UK investments in return for government support. At least 50% of the total size of the investment vehicle should be invested in UK-based science and technology companies, and applicants are expected to demonstrate how their investment strategy will deliver this. We will look more favourably on proposals that can demonstrate a greater commitment to UK-based science and technology companies than the minimum set out above.
Useful definitions relating to sectors are included in the Annex of the Call for Proposals.
LIFTS Proposals
Can a consortium of applicants come together to submit a proposal?
Yes, but they should demonstrate consideration of the potential issues from operating as a consortium model (such as those relating to ensuring a stable and effective structure) and show that the proposal meets the requirements set out in the Call for Proposals. Applicants must have all appropriate permissions, registrations, and authorisations to raise and operate the relevant investment vehicle.
Can applicants submit a proposal for a proportion of the LIFTS funding rather than the full amount as detailed in the Call for Proposals?
Yes, applicants may request use of a proportion of the funding available. Applicants should provide a clear and detailed explanation of how the proposal would use the offer of government support up to £250m to achieve the LIFTS Objectives, and how taxpayer value is to be protected and maximised. The BBB and government reserve the right to award successful bidder(s) less than the amounts requested.
Is there a minimum commitment required?
No, there is no minimum commitment required, but we would expect strong proposals to wish to make use of a substantial proportion of the funding available to catalyse further investment.
Can the same fund manager be awarded multiple sub-funds?
No, applicants may only submit one proposal.
How do I submit the documents required for the Call for Proposals process?
If you wish to submit a proposal, please follow the instructions outlined in the Call for Proposals.
How do I submit a proposal?
- Applicants should email proposals to the LIFTS inbox, with clear subject heading marked ‘LIFTS Proposal – [Applicant name]’.
- All Respondents will receive an email confirming receipt of their Proposal and details will be provided to Respondents on how to submit supplementary information.
- Applicants should also provide a completed Equity Track Record Proforma using the template provided.
- Any accompanying spreadsheets should be compatible with Microsoft Excel.
- By submitting a Proposal, applicants confirm that they have read and understood the CfP, including the Legal Notice.
- Any questions or clarifications about the content of the CfP should be sent to LIFTS@britishbusiness-bank.co.uk.
Is there a page limit on the submission document?
Written submission should be no longer than 12 pages (including appendices) with minimum size 10 Arial font.
What is the deadline for applications?
15:00 Friday, 28 July 2023.
I’ve submitted an Application. What happens next?
For further detail on the process, please consult the LIFTS Call for Proposals.
The Call for Proposals indicates the potential for further funding (in excess of the £250m). How much / when and how will that decision be made?
Any additional LIFTS funding decisions will be made by HMG after initial assessments have been conducted by BBB. In the event that we receive multiple bids of high quality that would collectively require a greater sum of funding than the proposed initial £250m amount, HMG will consider the merits for going beyond this proposed amount on a case-by-case basis.
Are there any excluded sectors for investments?
Please see the Call for Proposals for details. Successful applicants will need to evidence appropriate ethical standards in relation to the proposed investment activity, operations, and general business activities. Applicants should provide detail of the sectors and sub-sectors they intend to invest in as part of their applications.
Do I need a physical UK presence to bid?
The Call for Proposals does not exclude bidders who do not have a physical UK presence. An applicant’s investment team will need to have a UK presence of some nature and, other things being equal, proposals with a substantial investment team presence in the UK with a clear commitment for this to be maintained in the long-term will be preferred.
Are there restrictions on types of fund structure?
We are seeking proposals from industry for the establishment of new funds or investment structures to crowd in UK institutional investment. Applicants may utilise conventional VC funds, LTAFs or other structures. Applicants must demonstrate how the specific design of the fund/structure meets the particular requirements of institutional investors. Proposals must meet the LIFTS objectives and satisfy the assessment criteria set out in the Call for Proposals.
How can I demonstrate support from institutional investors?
Applicants must demonstrate the support of at least one UK DC pension scheme (which should be UK based and/or have material control of assets from UK savers, clients, policyholders, or individuals). This support, and other UK institutional investor support, could be demonstrated by either (i) the application directly involving a UK DC pension scheme, either as lead applicant or co-applicant with an authorised asset manager; or (ii) the applicant(s) demonstrating viable in-principle commitments. Examples of evidence of commitment could include letters of support from DC schemes or written proof of intent to invest, but other forms of evidence may be accepted. All other things being equal, more credible demonstrations of commitment from a UK DC pension scheme will be preferred. Proposals should also outline the amount that applicants expect to be committed by the DC scheme(s) involved.
I am a DC scheme with internal asset management capabilities. Do I need to demonstrate additional external DC involvement to be eligible?
The Call for Proposals invites managed fund proposals from DC pension schemes (or consortia) and authorised asset managers where there is at least one UK DC scheme willing to support the proposal and invest. An authorised asset manager could be internal, so long as the proposal meets the LIFTS objectives and satisfies the assessment criteria set out in the Call for Proposals. Additional external DC involvement would not be a pre-requisite for eligibility in this case, however applicants should note that, all other things being equal, proposals that can demonstrate a stronger catalytic effect in the market will be preferred.
Are FCA regulated venture capital managers eligible to apply?
FCA regulated venture capital managers are eligible to apply provided at least one UK DC scheme is willing to support the proposal and invest. Applicants must demonstrate the support of at least one UK DC pension scheme (which should be UK based and/or have material control of assets from UK savers, clients, policyholders, or individuals). This support, and other UK institutional investor support, could be demonstrated by either (i) the application directly involving a UK DC pension scheme, either as lead applicant or co-applicant with an authorised asset manager; or (ii) the applicant(s) demonstrating viable in-principle commitments.
I am a fund manager interested in applying. Can the British Business Bank facilitate an introduction with a DC scheme?
We encourage interested authorised asset managers to make use of existing relationships with DC schemes and use LIFTS as a catalyst for establishing new relationships. The LIFTS team will not be facilitating introductory meetings.
How firm does the commitment from an asset owner to invest in a LIFTS proposal have to be at this stage?
While we are seeking strong evidence of viable in-principle commitments, we appreciate that final arrangements are subject to complex and often lengthy commercial negotiations, and we will take this into account when making our assessment. For further detail on evidence of institutional investor commitment, please see How can I demonstrate support from institutional investors? in these FAQs.
In the case of a Long-Term Asset Fund (LTAF) structure, how soon would the fund be required to launch?
In the case of investment on pari passu terms (Support Option 1), would matched funding from the BBB be available for all funds included in the associated vehicle, or only the DC pension fund component?
In respect of proposals seeking investment on pari passu terms, Government via the BBB would be able to provide funding in respect of commitments of private sector investors, which may or may not be on a matched basis. Regardless of the basis on which the funding is provided, the BBB commitment can represent no more than 49.9% of the total fund commitments (from all sources, DC pension or otherwise) at any time.
All options will be assessed using the assessment criteria outlined in Section 3 of the CfP, and the BBB and government reserve the right to award successful bidder(s) less than the amounts requested. The exact amount of fund commitments/fee support provided by the BBB will depend on the strength and nature of proposals.
How does the Chancellor’s Mansion House announcement on 10 July affect the LIFTS initiative?
The initiatives are separate but complementary and are both aimed at ensuring there are vehicles to support pension fund investment into assets that support UK growth. The LIFTS initiative is calling for proposals for vehicles to attract pension fund investment into science and technology companies, which the British Business Bank could support. The deadline for proposals to be received is 28 July.
Separately, the Bank is testing whether it uses its capability and opens its pipeline of commercial investments in high growth companies for pension funds and potentially others to invest in.
What does 'crowd-in' mean in this context?
We are seeking proposals that can demonstrate they would be able to catalyse further investment from the private market if they were successful in receiving support from the Bank/HMG via LIFTS. In this context, “crowd-in” means the commitment of institutional investor capital to the vehicle or vehicles alongside the capital contributed from the LIFTS programme.
What does the £250m cover?
The £250m figure refers to the funding expected to be available for the LIFTS initiative to invest into a successful proposal or proposals via one of the support levers outlined in the Call for Proposals – investment on pari passu terms with private investors, investment on subordinated terms or fee support.
Is there a maximum number of participants per proposal?
No, there is no maximum number of participants. Consortium bids should demonstrate consideration of the potential issues from operating as a consortium model (such as those relating to ensuring a stable and effective structure) and show that the proposal meets the requirements set out in the Call for Proposals. Applicants must have all appropriate permissions, registrations, and authorisations to raise and operate the relevant investment vehicle.
Will details of proposals be kept confidential?
In line with its usual processes, BBB would look to treat proposals as confidential. However, applicants should note that successful proposals will be subject to government departmental and ministerial sign-offs on a value for money and affordability basis. Accordingly, BBB may disclose information in relation to proposals to HM Government as part of the assessment and approval process.
In addition, applicants should note that public bodies are subject to access to information regimes. As such, information received as part of the LIFTS assessment process may be published or disclosed where required under those access to information regimes. In view of this, if applicants are of the view that any information should be treated as confidential and/or commercially sensitive, it would be helpful if applicants could set out why they consider this to be the case in each instance, so that BBB may take these factors into account when assessing its position under those regimes.
Please see the terms and conditions set out at Section 4 of the Call for Proposals for further detail.
Sign up for our newsletter
Just add your details to receive updates and news from the British Business Bank
Sign up to our newsletter