BGP reveals investors for £200m first close of initial fund
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Aegon UK, NatWest Cushon, and M&G have committed assets towards a £200m first close of the British Growth Partnership Fund I, subject to final terms and relevant approvals. The fund aims to start deploying capital into “high growth” UK companies in 2026. Isio advised on creating and positioning the fund.
The British Business Bank, which runs BGP - one of a number of partly overlapping investment initiatives kickstarted by the government - said all parties have now completed investment diligence and are finalising terms and structuring. Aegon and NatWest Cushon announced their intention to invest with the British Growth Partnership in November last year.
The Bank is targeting a first close of £200m by end of the financial year. The Bank said that “the initial fund will seek to raise hundreds of millions of pounds, including a commitment from the British Business Bank, to invest in some of the highest potential opportunities in the Bank’s venture capital pipeline”.
The fund will have a direct investing strategy, co-investing alongside the Bank’s network of fund managers. The BBB said investments will be made on “a fully commercial basis, independent of government”, using “the Bank’s position as the most active late-stage investor into UK companies and the largest investor in UK venture and venture growth capital funds”.
Discussions regarding a potential investment into the fund by the London CIV are ongoing, according to the Bank. The Local Government Pension Scheme pool said in May that it intends to work with the BBB on the launch of the British Growth Partnership.
BBB chief executive Louis Taylor said: “Today’s announcement brings us one step closer to mobilising institutional capital at scale into the UK’s fastest growing companies, both diversifying pension portfolios and providing much needed scale up funding.”
The Bank is also planning to launch a Venture Link initiative for pension funds, meaning it will publish “enhanced information” on its commitments to venture funds. It said this forms part of measures “to help pension funds to boost their investment capability” and reduce barriers to investment. The Bank said it will consult with stakeholders on the design of this initiative.
Alex Seddon, head of impact and private equity at M&G Investments, said: “Britain’s businesses need patient capital to truly scale. By attracting more investment, the British Business Bank is taking a major step to drive dynamic growth and strengthen the UK’s position as a leading hub for innovation.”
Aegon UK said the initiative aligns with its “commitment to supporting the UK’s most innovative and high-growth companies, while delivering long-term value for our customers”.
The British Growth Partnership is a vital step forward to unlocking investment opportunities, said NatWest Cushon.
“The investment due diligence is complete, and we are excited to move forward subject to trustee approval,” it added.
The three investors are among a group of defined contribution providers that signed the so-called Mansion House Accord in May, committing to allocate 10% to private markets, half of which in the UK, provided there are suitable opportunities. The Accord follows the unsuccessful Mansion House Compact from 2023 and was signed against a backdrop of ministers giving themselves temporary powers to mandate productive finance investments for DC providers, as part of the pension schemes bill.
Challenging fundraising environment
In the UK, only about 10% of capital for VC funds comes from pension savings, compared with 70% in the US, meaning the UK's venture capital ecosystem is relatively undercapitalised compared with the US.
The fundraising environment is currently more challenging than it was a few years ago, with a dearth of exits exacerbating the issue. Waning appetite from private equity firms and a lack of IPOs are part of the issue.
In its 2024-25 annual report, the BBB reported a five-year adjusted return on capital of 4.2%. Of the assets, which include those managed on behalf of the Department for Business and Trade, 63% was considered equity and 37% debt.
