FUNDING Circle has launched a new fund that will enable institutional investors such as pension funds to lend to small- and medium-sized enterprises (SMEs).
As part of the launch, Merseyside Pension Fund will invest £30m in the new vehicle, which is called the UK Economic Impact Fund.
The fund is a new way for institutional investors to lend to SMEs through an eight-year, closed-ended structure, targeting annual returns of between 5.5 per cent and 6.5 per cent.
Funding Circle said that direct lending funds typically focus on the private equity sponsored middle market, with loans ranging from £20m to £400m, despite the fact that small businesses are responsible for 50 per cent of the UK’s economy.
Read more: Funding Circle set for fourth securitisation
“Today’s announcement is further validation of the important role lending platforms play in making the SME loan asset class accessible to a wide range of investors,” said Sachin Patel, chief capital officer of Funding Circle.
“Through our latest UK Economic Impact Fund, investors can contribute to economic growth and job creation by supporting small businesses, whilst earning attractive, stable returns as a result. We welcome the opportunity to work with Merseyside Pension Fund as the lead investor and we look forward to welcoming more investors in the near future.”
Linda Desforges, senior portfolio manager at Merseyside Pension Fund said: “We view Funding Circle as the pre-eminent operator in the platform lending space and are pleased that through their infrastructure we can support small businesses whilst earning a good level of income for the Pension Fund.”
The peer-to-peer business lender unveiled its plans to launch two new institutional products back in April, when it revealed that it would be winding down its dedicated investment trust, the Funding Circle SME Income Fund.