Don’t the UK’s special opportunities need more help from the top?

There’s an important opinion piece in this morning’s FT, I know some of my readers don’t get a digital FT so if you mail me at, I will provide you with a link to it – subscribers get a certain number per month.

The piece is by Helen Thomas and it is full of insights and humor, its title is

What the UK should learn from Australia on pensions

and its theme is that political edicts on investment strategy are not the right way to emulate Australia’s success.

The article is published in a week when Jeremy Hunt has turned his attention to pensions as a source of refinancing Britain’s infrastructure , including corporate finance to its fastest growing companies.

What is missing from the argument is the argument for investments in private markets, that they can provide a return on investment that feeds through to more income in retirement from the pots most of us are building.

I suspect that the rules surrounding financial promotions prevent the advertisement of these returns but there is no doubt that they exist and the lifestyles of those who manage private equity, credit and hedge funds is proof they are lucrative.

While we are all wary of bubbles, many of the investable projects are very tangible and can show transparently where value is created. Nor need trustees invest with managers who simply focus on high turnover to generate fees, due diligence is available through a small but select number of advisers who can prick the bubbles and identify managers and investments that are likely to succeed.

It is entirely wrong to say that these opportunities are not available, the trouble is more on the buy-side. To access these opportunities needs scale and ambition . Of the large master trusts – Nest, People’s, Lifesight and L&G we see sporadic ambition – most notably from Nest. But outside these £20bn schemes, the second tier of master trusts are divided between those who dare not take risks with the little they have and those who set out their stall to lead from the back. Innovating as Smart and Cushon do, with relatively small asset bases , requires balls of steel.

Helen Thomas’ article quotes two figures familiar to readers of this blog on the current state of play in the UK and why it does not correspond to what is happening in Australia.

Gregg McClymont , who represents IFM,  a fund created by Australian pensions argues that collaboration is key. Australian  occupational schemes created their own vehicle (IFM) to pool resources and avoid leakage of fees to third parties.

“Pensions is not a cottage industry,” says McClymont, and this approach achieved scale quickly.

Could the commercial master trusts work together? It has, to an extent already happened with Nest and Cushon working on a joint investment strategy. But we have a Government overtly nudging large schemes to more actively invest in the UK and essentially in growing companies that are typically unlisted. Andrew Warwick-Thompson , the second figure know to readers is quoted as saying that the Government is not playing its part in making opportunities for master trusts he is involved with

 “It is not pension regime reform that is needed to increase investment in UK assets . . . but coherent, stable and sustainable economic and industrial policies to make the UK fundamentally more attractive to investors…In a global market competing for their capital, investors need to be attracted not coerced.”

Chicken or egg? Can Jeremy Hunt turn round the British economy in time for the investment he craves? Clearly this is not going to happen overnight.

I spoke to the COO of Fundsmith, Mark Laurence  on this yesterday. Fundsmith invests in 28 companies around the world, only two are listed in the UK and neither is primarily active in Great Britain. The listed opportunities are very limited reflecting the issues that AWT highlights. These are not going to change because of a Chancellor’s magic wand.

What Government can do , and this is what the Lord Mayor of the City of London is calling for, is deploy funds in state owned pension funds – Nest and the PPF to seed a wealth fund designed to seek out UK opportunities , managed by some of the bright investment experts already employed by Government and available to pension schemes with the ambition to hold investments over time. These need not be restricted to commercial master trusts operating in the UK , but could attract money from insurers operating defaults within workplace GPPS those  DB plans wishing to stay open and the fast evolving in retirement market – currently dominated by wealth managers but soon to be supplemented by funds looking to manage pensions from pots.

I would like to see such a fund have a ten year target to attract at least £500bn so as to rival sovereign wealth funds and the large funds from Canada , USA and Australia that seize investment opportunities in the UK that are currently beyond the reach of even our largest pension funds.

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
This entry was posted in pensions and tagged , , , , . Bookmark the permalink.

1 Response to Don’t the UK’s special opportunities need more help from the top?

  1. Con Keating says:

    Iain and I raised the issue of government direction of investment in our first blog of the year

    The proposed new funding regulations and code raise exactly these issues

Leave a Reply