Bim’s speech yesterday lunchtime was so widely reported in the trade press yesterday morning, I’m surprised anyone bothered turning up. You can watch him here
Bim Afolami wants a “capital renaissance” so that capital locked up in our pension schemes refreshes the rusty London stock market and British industry can plan ahead in the sure knowledge that pension money is coming its way.
His strategy is pretty simple. He talks to the market and warms up his plan. He points out that while the number of people owning shares directly has fallen by 15% in recent times, 6 million of us have decided to invest in some form of crypto. He sees the appetite for private investment as unabated, it just isn’t for British stock ( at present).
He has a number of initiatives, PISCES sounding the most interesting, though work on prospectus’ and settlement times sound the kind of things a clued up finance minister should be doing.
But Bim’s angst is principally focussed on pension schemes – especially DC pension schemes, as lagging competitors in investing in private assets. He cites the Australian Supers which invest ten times the amount of British peers, in private equity and infrastructure. Ironically, much of this investment is in UK companies.
He is not alone. Charles Morgan of the British Bank has been saying much the same to City AM
His remedy is to get pension schemes to disclose its exposure to UK equities and private markets. Many will be considering higher allocations to home markets independently of this “threat”.
Yesterday , the flagship FTSE 100 touched a record 8,474, over the past 3 months it’s even outperformed the S&P 500.
Maybe some pension schemes will see the 9.5% year on year rise in the FTSE 100 as the sign of things to come. Maybe investment through this index will bring its own reward.
But we do not seem to be helping ourselves, the vast weight of UK pension assets are invested in gilts (DB), Corporate Bonds (annuities) and global equities (DC). What can a Government do to make investing in Britain through British listed companies easier?
One suggestion , which I know he is aware of, as Ros Altmann laid it out at a (not so) recent meeting I was at, is that the Treasury lean into the FCA to get the disclosures made by investment companies quoted on the FTSE 250 reasonable.
At the moment , they have to make cost disclosures which overcount the costs of investment making direct investment into investment trusts unattractive. Not only are the disclosures fundamentally wrong , but they are thought to have much to do with the deep discounts at which investment trusts are trading. They are a hangover from European dictats on Mifid and the rules on disclosures need immediate reform.
Ironically it is in the FTSE 250 companies, albeit wrapped within investment trusts, that capital is most needed. Though it too is up nearly 8% over the past year, the index continues to lag the FTSE 100 , the S&P 500 – up over 25% last year and the Nasdaq over 35%. Though there be some signs that companies may consider floating on the London Stock Exchange, the evidence over the last few years is that America is more attractive.
Bim’s angst, liberally delivered in Angel Court yesterday, could better be turned upon his own regulators who seem unable to win the hearts and minds of investors or founders of the companies that he hopes will make Britain great again.
It’s well worth watching this shorter video too.
