NOVA

Driving investment in UK growth opportunities

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This page provides a summary of the BVCA's NOVA proposal.
 

What is NOVA?

The New Opportunities for Venture and growth Acceleration proposal, or “NOVA”, is a proposed new marketplace to facilitate UK pensions investment into venture and growth capital funds. It draws on lessons from France’s Tibi scheme and is centred on the establishment of a marketplace of accredited private capital funds that would be overseen by a partnership between the Government, the British Business Bank (BBB) and other industry leaders.

Delivering on the Mansion House commitments

Bold action is required to increase investment, boost growth and help address the scale up gap facing high growth businesses, as well as provide better returns for UK pension savers. The Mansion House Compact and Accord signify a commitment from industry and the Government to facilitate investment from DC pensions into UK private markets, and venture and growth capital funds specifically. The active deployment of capital from DC pensions to private capital funds has been slow as many DC pensions face significant challenges.

The vast majority of Compact/Accord signatories and the wider DC market are still at a very early stage in developing strategies to invest in venture and growth capital funds and high growth companies. It can take many years to develop the necessary expertise and track record.

Central to NOVA is the creation of a fund accreditation process to deliver an investment pipeline of venture and growth capital fund opportunities for UK pensions, with Government facilitation at its core. This design element has been fundamental to the success of the Tibi scheme, which brought c.€20bn of institutional investment into French private capital funds investing in the French tech ecosystem.

In the UK, the Mansion House Compact/Accord represents a similar political commitment, but there is no UK equivalent of the French accreditation system that works as a delivery mechanism. NOVA brings this additional element.

 

How NOVA would help drive progress

NOVA would boost the scale and pace of DC investment into UK private markets, and venture and growth capital funds specifically. NOVA would also give DC schemes access to these investment opportunities via a trusted initiative and the chance to build teams and expertise directly.

With support from key stakeholders including the City of London Corporation and the British Business Bank, NOVA would help address the current gap and support investment leading up to 2030 and beyond.

A collaborative approach between industry, policymakers and the BBB

The cross-industry nature of NOVA will require collaboration from pension and private capital industry representatives, industry bodies and policymakers to develop an appropriate accreditation process and foster participation.

The BBB is a key stakeholder and we are working with the Bank to explore the proposal in more detail. Given experience with the British Growth Partnership and new remit the BBB can provide important relevant expertise. However, the NOVA proposal would go bigger and broader, aiming to capture investment opportunities beyond the current BBB focus, to include a wider potential range of UK venture and growth capital funds.

This collaboration should be based on the common aim of achieving the following:

  • Confidence among pension schemes – ensure high-quality, expert and senior stakeholder involvement, including from experienced LPs, so that pension schemes are confident that NOVA accredited funds are high-potential investment opportunities that will help deliver their Mansion House commitments
  • Fair process for private capital firms – to encourage private capital firms to engage, the NOVA process will need to be fair and transparent
  • UK Government senior political support and practical participation – to drive progress, we need senior government support to secure momentum and investor commitment through to delivery
  • British Business Bank support and practical participation – close involvement in NOVA of the BBB would be important because of the Bank’s expertise and understanding of the venture capital market.
  • Driving investment into Industrial Strategy growth sectors – UK-based venture and growth capital firms invest extensively across the IS8, driving innovation, productivity and private SME growth in these sectors nationwide. NOVA directly connects the Government’s pensions policy to its wider growth policy.
  • Bridge the “scale up gap” – help create larger UK-managed funds enabling UK firms to compete with overseas venture and growth capital funds (especially US funds) to lead later stage funding rounds for high-growth UK companies, which will extend the length of time that UK innovations remain UK-based.

 

Proposed governance and operation of NOVA and accreditation process

NOVA requires an operational framework based on an expert, robust, efficient, transparent and fair accreditation process, focused on the scheme’s strategic aims. Potential key features to be developed in order to deliver this are set out below:

  • Pension scheme participation:
    • No new commitment process for DC beyond Mansion House agreements
    • Potentially open to LGPS/DB schemes
  • Accreditation criteria for individual funds (for each product rather than each firm):
    • Firm credentials – UK based/regulated firms with demonstrable experience/track record of investing institutional capital
    • Fund terms and structure criteria – structures and terms aligned to investors’ interests and the proposed investment strategy
    • Fund investment strategy criteria - in line with the Industrial Strategy; core focus on innovative companies, science and technology
  • Accreditation Council:
    • Purpose - oversee NOVA, monitor and define the accreditation criteria; award accreditation to specific funds
    • Frequency - convenes and takes decisions on a quarterly basis
    • Composition – senior government representatives from key departments; BBB; independent representation from institutional investors; observers from industry bodies
    • Accountability – the Council would report to a Minister on a bi-annual basis on the decisions taken and progress made; public updates on progress/deployment
  • Platform:
    • Portal – dedicated NOVA portal hosted on HMG website to connect pensions investors and participating VC and growth capital funds

 

Feedback

Building on the design features proposed by the Pensions & Private Capital Expert Panel, the BVCA is developing the NOVA proposal with HM Government and is gathering views on how it can be developed and implemented further.

Specifically, the BVCA is seeking feedback on the following aspects of NOVA:

  • Technical design features of the accreditation process.
  • Managing conflicts of interest.
  • Assuring quality for pensions investors.
  • Ensuring sufficient collaboration from relevant industry and policy stakeholders.

 

For further information please contact the BVCA Policy Team

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