IFM, the organisation that employs Gregg McClymont, Maria Nazarova-Doyle , Phelim Bolger and Amanda Latham – all regulars on this blog – has been speaking with the FT
This is not what a Government that has been in power for 13 years , the majority of which they have been demanding “growth” from the economy – wants to hear.
If pensions are to have purpose, make an impact by making our money matter, they need to get invested in long term capital and not sit as “dry powder” waiting for deployment. I expect we will hear plenty of this kind of talk at the Manchester PLSA annual conference this year.
It’s ironic that most of the delegates will be travelling to Manchester by train. HS2 may make it there one day , but no further. Meanwhile, yesterday, thousands of passengers were comparing Euston station with the chaos of the Middle East. To suppose that we have the infrastructure in place is wrong, what we lack is the long-term vision to see infrastructure plans through.
So long as investors feel that the patient capital they deploy, might never deliver its intent they will – as IFM is threatening to do – hold back. The interface of politics and pensions is at its most fragile when the big-ticket investments are under discussion. USS’ investment in Thames Water is a case in point. Thames Water could and should be doing much to improve the society we live in (at least in the Thames Valley). It fell victim to some asset stripping from an overseas private equity house but is now owned largely by pension funds, most importantly by USS. Thames Water is a politically charged stock where pensions can make a difference.
IFM was formed by large Australian DC pension schemes to ensure that Australian money captured the best opportunities around the world – opportunities that were not available from public markets. It owns big chunks of Manchester Airport and the M6 toll road.
We don’t have an IFM in this country but you might think that the Compact between insurers to invest up to £50bn or 5% of pension assets into private equity and venture capital comes close.
I am aware that there is a difference between the M6 toll and a fintech start up but what unites them , is that you shouldn’t be investing in them with a view of selling them on, they are buy and hold investments. They make promises which investors intend to keep and they expect the same from Government.
So when Luba Nikulina – IFM’s chief strategy officer tells the FT
“to make new investments we need to find financially attractive opportunities, but at the moment, there aren’t many.
There’s political uncertainty in the US but that’s taken to another degree in the UK. We’ve had four prime ministers in four years.”
our collective head might drop.
Of course there are people who are sourcing capital to create funds which can invest with purpose. I work with people who do this for a living. But they too are frustrated by the inconsistency they find and its not just with Government and planning rules.
The opportunity for private investment into the funded pension system is limited. Beyond the great open pension schemes- Nest, LGPS, USS , Railpen and a handful of others- there is little appetite to invest with purpose. The appetite is to get pension liabilities off corporate balance sheets and long-term considerations are subsumed by the immediate demands of “de-risking”. Unless a way is to keep UK’s corporate pension base invested in real assets, an opportunity for us to create our own IFM will have been lost.
The Compact and its £50bn target is a start, but £50bn is not enough to meet the targets the Government has set pensions. We need a new sense of optimism that long-term capital can deliver long term benefits for “savers” and for society.
Right now there is little of the optimism about – to make the Mansion House reforms happen. There is plenty of depressing talk about us not being able to deploy private equity into workplace pensions and very little positive talk about finding ways for our money to invest in Britain , it’s infrastructure and in the companies driving growth.
We have lost the mojo of “Cool Britannia” and we need to get it back. I hope IFM are at the PLSA’s event. I hope that we will be talking about deploying our money into the kind of projects they look reluctant to fund. But this is not all about IFM, we need British companies organising our investment, we need the Compact to work and we need a regulatory system that encourages the Mansion House reforms to happen.
We need optimism. That’s how we get back to the Cool Britannia I want to retire into!