EUROPE - South Yorkshire Pension Fund has committed almost a third of the capital raised for a maiden private equity fund targeting growth small and medium-sized enterprises.
The £1.5bn (€1.8bn) scheme has invested £9m in a £30m fund it took Cardiff-based private equity firm Westbridge more than two years to raise.
The Yorkshire local authority scheme is the largest - and the only pension fund - investor in the vehicle, which is targeting a 30% return.
The European Union's Competitiveness and Innovation Framework Programme has invested £7m via the European Investment Fund.
Much of the remainder has come from family offices and an existing network of industrial investors who will be instrumental in the growth strategies of the companies they invest in.
Westbridge partners are collectively investing 6% of the fund's capital.
Westbridge managing partner Guy Davies said: "Alignment is a hygiene factor if you want to raise sensible amount of money. I've put the maximum amount I can afford into the fund - I'm backing our investment judgement."
While US public pension schemes have been known to target niche private equity vehicles, it is relatively uncommon for their UK counterparts to do so - especially at the small end of the market.
South Yorkshire and Merseyside pension schemes have previously invested in vehicles targeting large private equity deals.
Davies plans to raise a second private equity fund once the capital from the current fund has been deployed, pointing out that proof of concept will make it less difficult to attract institutional investors - especially fund of funds working with smaller pension schemes.
"It was always going to be difficult to raise capital for a first-time team launching a first-time fund - it isn't a natural investment for a pension fund," he said, pointing out that his team approached around 350 potential LPs when it already had a £10m war chest and had begun to do deals.
The fund has invested an estimated £5m in three businesses.
"Typically, fund of funds will talk to us, then maintain a dialogue before eventually committing pension-fund money," Davies said.