M&G Investments and Schroders are among asset managers seeking to manage the proposed £1 billion UK Scale-up Fund, as the effort to bring more pension money into British science and technology companies moves from political announcement towards the mechanics of investing it. The manager-selection process follows the fund’s launch last month by a consortium of pension providers working with the British Business Bank and the Office for Investment.

The two large asset managers have been reported among applicants alongside a number of other investment groups, although the final shortlist and appointment have not been published. The British Business Bank said at the July launch that market engagement to appoint a manager would begin shortly.

The proposed vehicle is backed by pension organisations including LPPI, Border to Coast, Railpen, and Nest, spanning defined-contribution, defined-benefit, and Local Government Pension Scheme assets. Its stated ambition is to invest more than £1 billion in high-growth UK science and technology companies.

Appointing the manager will begin determining how that political ambition translates into actual capital allocation. Decisions about sector exposure, company stage, cheque size, follow-on funding, valuation discipline, liquidity, governance, and risk will shape the portfolio more directly than the fund’s launch language.

Pension reform is moving towards investment decisions

Successive governments have tried to connect Britain’s large pension asset base with domestic companies that need substantial amounts of later-stage capital. The UK produces a steady flow of startups and university spinouts, but companies entering the scale-up phase often need larger funding rounds, international investors, or overseas listings and acquisitions to finance further growth.

Pension schemes have historically allocated relatively little to those private growth assets because venture and growth equity can be illiquid, expensive to manage, and difficult to value. Larger pooled vehicles can lower some of those barriers by spreading exposure across several companies and allowing schemes to invest through a specialist manager.

The government has consequently presented the Scale-up Fund as a collective investment vehicle rather than a direct state programme. The British Business Bank intends to participate alongside pension providers, while the Office for Investment is helping establish the structure.

That design also separates the fund from policies that simply direct pension schemes towards domestic assets. Trustees and providers still have duties to pursue appropriate risk-adjusted returns for members, which means an attractive industrial-policy story cannot substitute for investment discipline.

Manager selection therefore sits at the point where industrial policy and fiduciary responsibility meet. A growth investor will have to find businesses capable of producing commercial returns while satisfying the vehicle’s UK science-and-technology remit, without deploying capital simply to meet a political objective.

The unresolved rules will determine its effect

Eligibility criteria for investee companies have not yet been published, leaving open basic questions about what counts as a UK business. A company may be founded in Britain but generate most of its revenue abroad, employ teams across several countries, or move its headquarters as it grows.

The stage of investment will matter just as much. Funding established technology businesses with institutional shareholders carries a different risk profile from backing deeptech companies that may need several more rounds before meaningful commercial revenue arrives.

There is also a question of scale. £1 billion could be meaningful for individual companies and may draw other investors alongside the vehicle, but larger rounds in AI infrastructure, biotechnology, semiconductors, and other capital-intensive sectors can absorb hundreds of millions of pounds at a time.

The fund may therefore have greater long-term effect as a model for pension participation than through its initial capital alone. If several large schemes can invest successfully through one pooled vehicle, subsequent allocations may become easier because governance processes, manager relationships, and performance records already exist.

Fee structures, performance hurdles, investment periods, follow-on reserves, valuation policies, and co-investment arrangements will also influence whether the vehicle behaves like patient capital or another private-market fund operating under a government-backed label.

M&G and Schroders bring the institutional scale expected of managers working with pension assets, but being named among applicants offers no indication of who will be selected. The useful test will come after the appointment, when the consortium publishes its mandate and begins committing money to companies rather than merely assembling a vehicle designed to do so.