The money has been raised through the M&G UK Companies Financing Fund which has been seeded with a further £500m from Prudential’s annuity business.
The money will be loaned to between five to 15 mid-cap companies that sit outside the FTSE100.
One of the biggest commitments to the fund has been made by the West Midlands Pensions Fund which is contributing £100m. The Greater Manchester Pension Fund is contributing between £50m-£100m, the London Pension Funds Authority £50m, while the Wiltshire County Council Pension Fund is committing £17.5m.
The BT Pension Fund, the Merseyside Pension Fund and the Suffolk County Council Fund have both expressed a strong interest in the fund, but have yet to make a commitment.
Much of the business for the fund has come from clients of Hymans Robertson, which in December issued a paper which “supported” allocations of 1-2% of assets to fund - assets which it recommended to be sourced from fixed income government bonds.
John Dickson, head of investment consultancy at Hymans Robertson, said: “The investment opportunity is to some extent unique as it offers access to the financing of midsized companies that do not typically issue listed debt, with the protections and covenants enjoyed by banks.”
Both Hymans Robertson and pension funds have all cited the in-depth credit analysis of the M&G team for their confidence in the success of new fund, which will be seeking a second tranche of investment after this first round of fund raising.
With 66 credit analysts, M&G claims the largest UK credit analyst team in the City and has won much new business since the growth of credit spreads for UK corporate bonds at the end of 2008.
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