Less institutional capital flowing into the UK in the face of Brexit spells opportunity for British family offices, fund managers say.
The European Investment Fund (EIF)—the European Union-backed agency which provides finance for small and medium enterprises—has committed upwards of €600 million annually to the UK in recent years, but is in the process of slowing its contributions, and would likely halt them entirely post-Brexit.
Other insitutional investors were holding back from the UK in the face sterling uncertainty, and a generally unpredictable macro environment.
Nick Curtis, managing partner at Sustainable Technology Investors, said for family offices, the disappearance of this institutional money would create “a really interesting dynamic”.
“The EIF was such a big influence in setting up new funds as a cornerstone investor, and then think about where institutional capital is interested in the UK, especially in ESG. It’s from Scandinavia, Holland, Switzerland,” Curtis said.
“Actually all of [these countries] are looking at the UK and thinking, I’m holding back until I know how the macro environment is going to shake out in 3 to 5 years.”
Scarcity of capital would be coupled with current record deal flow, and a political need to stimulate the UK economy.
“Add all this together and we see less competition for deals, which allows us to get them at decent prices, plus continuing strong deal flow out of the economic and political environment,” said Jim Totty, also a managing partner at the London-based Sustainable Technology Investors.
Sustainable Technology Investors is currently fundraising for its newest project, the Nobel Sustainability Growth Fund, backed by the Nobel family and with initial funding from the family office of Hargreaves Lansdown founder Steve Lansdown.
The Nobels’ support follows their family legacy of ethical business practices. The best known family member, Nobel Prize founder Alfred Nobel, had two brothers who were oil magnates in 19th century Russia, but provided employee benefits including education, housing, co-operative banks, and profit sharing.
"They were essentially early pioneers of what we now call corporate social responsibility," Totty said.
"The Nobel family have retained that social sustainability theme, though we’re now down to fourth and fifth generation descendants who have set up a new foundation, the Nobel Sustainability Trust which is designed to promote sustainability globally."
The new Nobel fund is a partner of the trust and its early investments include Propelair, which manufactures toilets that use 84% less water and 80% less energy; SoftIron, which makes low-energy transcoders and servers; and Arvia, a technology which removes toxic organic content from wastewater.
"We still see the UK as being one of the most innovative areas in Europe," Curtis said.
"Since 1990s the UK has been one of the most successful de-carbonising countries in the world, and we are leading in terms of being the first country to introduce legally-binding emissions targets."