The London Stock Exchange is hatching plans to create a £300m listed vehicle aimed at bolstering the survival chances of companies hit hard by the coronavirus pandemic.
Sky News has learnt that David Schwimmer, the London Stock Exchange Group (LSEG) chief executive, has been spearheading talks with top City figures and the Treasury about establishing an investment trust called the UK Growth and Resilience Fund.
The scheme, which would principally invest in unquoted companies, is said to have been under discussion for months.
A fund management source said this weekend that BMO Financial Group, JP Morgan Asset Management and Octopus Ventures were being lined up to oversee three strands of investment, focused on private equity, listed small-cap companies and venture capital respectively.
LSEG would not be a direct investor in the new vehicle but would waive most of the fees typically paid by companies listed on its exchanges, according to the source.
It would initially aim to raise £300m but could be expanded to £1bn, the fund manager added.
One idea under discussion would involve seed capital for an initial public offering (IPO) being provided by coronavirus ‘winners’ or companies which have benefited from substantial government support, such as supermarkets, online retailers or direct-to-consumer investment platforms.
It was unclear this weekend whether any such companies had been approached about their willingness to support the initiative.
Simon Fraser, a former Barclays board member who chairs the Investor Forum, is understood to have been sounded out about becoming the UK Growth and Resilience Fund’s chairman.
A City figure whose views were canvassed by Mr Schwimmer said the UK Growth and Resilience Fund described it as “potentially a once-in-a-generation opportunity to help with the government’s levelling-up agenda while providing investors with attractive long-term returns”.
“This could logically fit within the ‘build back better’ narrative that ministers are focused on,” they said.
The source added that the “social impact potential” of the plan could deliver a big reputational benefit to Britain’s financial sector during a period when insurance companies’ row over business interruption claims has risked tarnishing the industry’s name.
Insiders said, however, that there was no certainty that the plan conceived by Mr Schwimmer would come to fruition.
The multi-manager approach to the UK Growth and Resilience Fund is said to have added a layer of complexity to the discussions which could impair the plan’s deliverability.
The proposed launch underlines concerns about the long-term scarring of the economy and certain industries which have been rocked by the ongoing impact of the coronavirus crisis.
While the government has provided hundreds of billions of pounds of emergency loans and guarantees, there remains deep anxiety about levels of corporate indebtedness resulting from the pandemic, and the impact of that on future investment activity.
The LSEG-inspired vehicle would be structured as an investment trust to enable institutional investors, wealth managers and retail investors to participate.
It would allow investment into unquoted companies which may otherwise struggle to raise equity as they seek to weather the pandemic.
Although there is not thought to be a specific list of companies that would be targeted for investment by the new vehicles, it would be expected to examine sectors such as healthcare and technology in particular.
Investment bankers at Barclays and Winterflood Securities, the market-maker, have been involved in talks about the project.
LSEG has been contacted for comment.