Some of Britain’s biggest asset managers are competing to oversee a new £1bn government-backed fund designed to channel pension money into the country’s fastest-growing startups, as the government steps up efforts to tackle the UK’s funding gap. M&G Investments and Schroders are among the firms to have applied to manage the new Scale-Up Fund, according to Sky News. A number of other firms, including early-stage investors, are also understood to be in the running.

The fund, announced by the government last month, will invest in high-growth science and technology companies using capital from UK pension schemes. It has secured support from the British Business Bank, the UK’s state bank, which will provide administrative and financial backing. Pension funds backing the initiative include LPPI, Border to Coast, Railpen and Nest.

The launch comes as policymakers seek to stem the flow of promising UK startups selling to overseas buyers or relocating abroad in search of larger pools of growth capital. The government has said the fund will help keep more high-growth businesses in Britain while generating stronger returns for pension savers. However, the eligibility criteria for companies seeking investment have yet to be published.

In a statement issued last month, prime minister Andy Burnham described the proposal as “a vote of confidence in British business, British talent and British ambition.” He said: “This new fund would help unlock good growth in every postcode, connecting pension investment with the entrepreneurs and technologies that will reindustrialise Britain and create the jobs of the future.” Stockholm-based EQT, which manages the EU’s similar Scaleup Europe €5bn fund, is not thought to be in contention, according to Sky News.