Provision of Fund Management Services.

Descriptions

Summary:— The UK Government and EU are supportive of using Financial Instruments as public policy measures to address market failure and stimulate business growth, job creation and technology development on a sustainable basis.— The North East Combined Authority (NECA) is procuring a panel of Fund Managers, on behalf of itself and stakeholders (Participating Authorities) in the North East Local Enterprise Partnership area. NECA is acting as the Commissioning Authority under this process.— A successor to the Finance for Business North East (FBNE) Fund-of-Fund programme is being established in the North East LEP area and this panel of Fund Managers will used by the North East LEP Area Fund of Funds Implementing Body to select FCA qualified Fund Managers to manage the Investment Funds (sub-funds) created under this North East LEP Area Fund of Funds Programme (which will invest across the whole of the North East LEP area).— In addition, the panel may also be used by any of the other Participating Authorities (including The North East LEP Area Fund of Funds Implementing Body, North East Access to Finance (NEA2F), North East Finance (NEF), the North East Local Enterprise Partnership (North East LEP), Business Durham and the local authorities of the North East LEP area) to secure Fund Management services for other financial instrument projects which they want FCA qualified investment managers to deliver.The Contracting Authority:The North East Combined Authority (NECA) is the Contracting Authority for the 1st stage of this procurement process (up to the appointment of the Framework Panel). The Framework Agreements will therefore be between the Panel Members and NECA. The Contracting Authority will subsequently allow 1 or more other Participating Authorities to access the concluded Framework Agreement, without creating any obligation on any of them to do so. In that event, the contractual relationship for any resulting Contract would be between the approved individual body (Participating Authority) accessing the Framework Agreement and the successful Panel Member.Background:The purpose of this procurement exercise is:a) To select a panel of Financial Conduct Authority (FCA) authorised fund management companies with the ability to deliver early stage funds and/or later stage funds and / or small loan funds across the North East Local Enterprise Partnership (North East LEP) area (comprising: Northumberland, North Tyneside, South Tyneside, Newcastle, Gateshead, Sunderland and Durham) and;b) To subsequently use this Framework Panel to select Fund Managers to Manage Investment Funds.On the basis of a detailed ex-ante assessment and considerable stakeholder consultation, the 3 Lots for which a Framework Panel is being created, are as follows:— Lot 1 — Fund Management Contracts awarded under this Lot will focus on Early-Stage Investment Funds;— Lot 2 — Fund Management Contracts awarded under this Lot will focus on Later-Stage Investment Funds;— Lot 3 — Fund Management Contracts awarded under this Lot will focus on Small Loan Funds.Both Lot 1 and Lot 2 will require Fund Managers to use a variety of financial instruments and utilise their ability to potentially deploy debt, equity and mezzanine finance. Lot 3 requires Fund Managers to deploy smaller amounts of predominantly debt finance.The procurement exercise will be undertaken via a 2-stage process, using a Competitive Procedure with Negotiation (CPN) procedure. As outlined above, the 1st stage of the process will lead to the appointment fund management companies to a Framework Panel. The 2nd stage of the process will lead to the appointment of fund management companies (selected from the Panel) to manage specific Investment Funds created under each of the 3 Lots (undertaken via a mini-competition process).The Framework Panel may be utilised by:— The North East LEP Area Fund of Funds Implementing Body — to identify and procure Fund Managers for the North East LEP Area Fund of Funds programme (that will invest across all of the North East LEP geographic area);— Any of the Participating Authorities — to identify and procure Fund Managers for Financial Instrument programmes that require FCA qualified fund managers (that will invest across all or part of the North East LEP geographic area — as specified by the relevant Participating Authority at the time of call-off).The North East LEP Area Fund of Funds Programme:The North East LEP Area Fund of Funds programme is expected to be capitalised with circa 120 000 000 GBP of contributions from: the European Regional Development Fund 2014-2020 programme; returns generated from previous UK government and ERDF backed venture capital funds; a loan of circa 60 000 000 GBP from the European Investment Bank (EIB) and other sources of funding that may become available subsequently.The programme will invest into a number of new venture capital and loan funds which are likely to be structured as limited partnerships and managed by independent, FCA-authorised fund management companies.A North East LEP Area Fund of Fund Implementing Body is expected to be appointed by DCLG. The Implementing Body's responsibilities include:— Overall project delivery and regulatory compliance responsibility;— ERDF grant recipient and responsibility for achieving ERDF outputs and objectives;— The monitoring and performance management of fund managers appointed under the North East LEP area Fund of Fund programme.Once appointed, the Implementing Body will be able to use the Framework Panel procured by NECA in order to procure the North East LEP Area Fund of Fund sub-fund Managers. This will be done through mini-competitions for contract opportunities which fall under the relevant Lot. The Implementing Body will enter into Limited Liability Partnerships with the successful Fund Managers whose services are called-off under the Framework Agreements.The precise nature and size of the investment funds to be launched under the North East LEP Area Fund of Funds programme will be communicated to fund management companies at the mini-competition stage. However, at this stage, it is anticipated that a suite of 5 funds will be created under the programme in the North East LEP area. A number of the key economic growth ‘outputs’ that are associated with the operation of the North East LEP Area Fund of Funds programme are summarised below:Fund Size — 120 000 000 GBP;No of Investments — Circa 630;Jobs created — 3 700;Private sector investment leverage — 120 000 000 GBP;Legacy generated — 80 000 000 GBP.Investments under the North East LEP area Fund of Fund programme (depending on the individual fund) are expected to range between 10 000 GBP and 2 000 000 GBP and most funds are expected to be between 20 000 000 GBP and 30 000 000 GBP in size. Funds created under the North East LEP Area Fund of Funds programme are likely to be able to invest in all eligible business sectors in accordance with Contracting Authority requirements and EC State aid regulation eligibility rules.Based on the analysis undertaken for the development of the North East LEP Area Investment Strategy, 3 Framework Lots have been identified:— Lot 1 (Early-stage funds);— Lot 2 (Later-stage funds);— Lot 3 (Small loan funds).For the purposes of the North East LEP Area Fund of Fund programme only, Fund managers are expected to be permitted to manage only 1 of the investment funds procured under Lots 1 and 2. It is however possible for fund managers: (a) To bid for more than 1 Lot in order to be appointed to the framework panel for multiple Lots; and (b) Be selected to manage a fund under Lot 1 or Lot 2 as well as a fund under Lot 3.Use of the Framework by Participating Authorities:In addition to its use under the North East LEP Area Fund of Fund programme, the Framework may also be used by Participating Authorities to call-off fund management services in order to secure Fund Managers for other Financial Instrument (FI) projects which they want FCA qualified investment managers to deliver. At present it is not clear to what extent the Framework will be used in this way.The relevant details of any call-off by Participating Authorities will be confirmed at the time of such call-off including: (a) The extent to which procured funds cover all or part of the North East LEP Area; and (b) The extent to which funds are able to invest in all eligible business sectors or are sector specific.Type of Procedure:Competitive Procedure with Negotiation;Reservation of Right to Award without Negotiations.Pursuant to Regulation 29 (15) the Contracting Authority reserves the right to award the framework contract on the basis of the initial tenders without conducting negotiations.