Ease pension fund risks ‘to drive expansion of our growth firms’

By PERRY GOURLEY
Published on 17/10/2012 00:00

GOVERNMENT guarantees could unlock tens of millions of pounds of investment from pension funds into cash-starved Scottish growth companies, a leading technology entrepreneur has argued.

Ian Ritchie, chair of the Royal Society of Edinburgh’s Business Innovation Forum which yesterday published a report looking at financing issues for fast-growing companies, said reducing the risk of investment for fund managers in Scotland could provide a major new source of backing.

The report found that while Scotland has a strong angel 
investment community providing seed capital for businesses, there was a major problem at the next level. With venture capital funding harder to find for expansion, companies were being sold before developing their full potential.

“That’s a fundamental problem as we are just not going to build larger companies in Scotland if they are not able to get the funding they need to grow,” said Ritchie.

The report points out that Scottish financial institutions have around £750 billion of funds under management, but only a tiny proportion of that 
is believed to be invested in Scotland.

“If you look at some of the big angel investor groups here, a lot of the people involved are professional fund managers – by day they are investing other people’s money outside Scotland, but by night they are investing their own money in Scottish companies,” Ritchie pointed out.

He said if investment deals could be structured so that the risk was reduced or reclassified for pension funds, then it could enable them to invest in innovative companies.