If it wasn’t so pathetic it would be funny.
The senior managers, charged with implementing the Mansion House Compact which means start-ups and scale-ups get long term capital from pension funds, don’t want to play,
The Compact was signed by the CEOs and Chairs of the big insurers and master trusts. It would seem that these big-shots , are pursuing a different agenda than the companies they are in charge of.
I’m reminded of Joe Strummer’s jibe on policy makers in “Remote Control”,
They’re all – Fat and old – Queuing for the House of Lords
The Middle (aka senior) managers are now moaning that these promises may sound good over a good glass of claret in the Mansion House but they aren’t compatible with with what the insurer has been selling.
Aviva, one of the UK’s largest pension providers, said one important issue was the question of how to introduce unlisted, also known as “illiquid” assets — which are typically more expensive than public assets — to existing “default” funds used by millions of savers.
“This is a problem because it is really hard once you have got someone set up with a scheme to then increase charges,” said Emma Douglas, head of workplace pension savings with Aviva. “It is still early days in terms of how we are going to do this [Mansion House compact]”.
Business sold on the cheap must now being repriced to give value for money, Employers pay consultants to get the cheapest workplace pension amongst their competitors The consultants appear to be sympathetic to this view of value for money.
Laura Myers, partner with LCP, the actuarial consultants, said that higher fees were an obstacle for the market as it sought to meet the Mansion House pact target. “The concerns we are hearing [from pension funds] are that if we put this illiquid asset in our default strategy, our default will be more expensive for members,” said Myers. “They are quite concerned that if they do go ahead with illiquids, and they are one of the first movers, then they could potentially not win business.”
Nest are worried that having to invest in start ups and scale ups is “risky”.
Pension funds are also concerned about investing in riskier assets such as venture capital that the government is keen to see supported as part of its ambition for the UK to become a science superpower. Speaking at an industry conference last month, Liz Fernando, chief investment officer of Nest, the government-backed workplace pension fund, said the fund would not go into early-stage VC as it preferred proven business models
This is like watching a “nursery” horse-race and backing the winner in subsequent races. It is of course safer to bet on horses that are odds on , but that is not the point of the Compact. Everyone knows that the spoils of horse racing are taken by the owner/breeders and by the people who understand what makes horses winners.
Callum Stewart, once the cheerleader in chief for workplace pensions to invest in illiquid assets seems to have developed a fine line in sententious common places.
“We reserve the right to invest in venture as part of a wider private equity allocation, only if we think it is in the best interests of members,” said Callum Stewart of Standard Life.
Well you don’t say!
Don’t forget Callum that your big boss, Nick Lyons (Chair of Phoenix Life) was the architect of the Compact when City of London Mayor. You’re on a promise , just as all the other signatories are, to actually get your sleeve of VC and PE in place by 2030.
This collective back pedalling suggests that these managers are rather less keen on being held accountable for conviction in their decision making or loss of sales or loss of face and their advisers seem all sympathy with these vapid views.
Having happily promoted the Mansion House reforms in July, the great and the good now see personal and corporate reputations on the line and are looking for the usual sugar-coating of the pill by way of tails we win , heads you lose guarantees from the tax-payer.
Here’s John Chilman, chief executive of Railpen, which invests about £34bn in assets for the 350,000 members of the railways pension scheme.
“The only way to make pension funds really go for this [to invest in the UK] is [for government] to make some sort of first-loss provision or additional incentive to say this is why we are going to share some of the pain on this if it doesn’t work out,”
What marks these middle/senior managers out is that they are not prepared to take any personal risk to their salaries, bonuses, reputation or jobs.
These roadblocks are not new. They have been in place for decades. As my good friend Glesga, points out on X
Worth revisiting this from Paul Myners. Commissioned by Gordon Brown as there wasn’t enough investment by pension schemes in private equity. pic.twitter.com/C7pUhqAeid
— andrew young (@glesgabrighton) November 19, 2023
To get productive finance into pensions , fiduciaries, executives and sponsors of occupational pension schemes are going to have to justify their high salaries by
- Selling pensions on value not price
- Explaining to customers who’ve bought “cheap and cheerful” – value for money
- Researching the market so you pick winners at decent prices
- Doing what your bosses promise you are going to do
- Quitting whingeing that the tax-payer isn’t bailing you out.