A consortium of some of the UK’s largest pension providers has agreed to “explore” the creation of a new fund to back the most promising British private companies.
The proposals for a so-called UK Scale-up Fund are backed by several pension managers including Railpen, which manages £34 billion in assets and oversees railways pension schemes, Nest, the government’s workplace pension scheme, and Border to Coast, one of the largest pension pools in the UK, responsible for around £120 billion of assets.
The new fund is expected to manage more than £1 billion, and the government said it would be of
“sufficient scale to target the best opportunities born out of UK innovation in science and technology”.
Here’s Pension Minister Torsten Bell tweeting yesterday
More than an idea from a junior minister, this comes from the Prime Minister
“By bringing together major pension investors, the UK Scale-up Fund would help connect institutional capital with the companies, founders and venture managers driving the next wave of British innovation,”
Andy Burnham said the scheme 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”.
The British Business Bank, the government’s economic development agency, is working alongside the pension providers to support the launch of the fund and with the intention of investing in partnership with the consortium.
Talks on the fund are understood to be at an early stage and no details are yet available on the fund’s mandate or structure. The talks come in the context of concerns that progress has been too slow on getting pension funds to back British companies after a contentious government push for them to do so.
There are also concerns that UK markets are not attractive enough to retain the highest quality companies. The government wants more UK pension money to be used to support domestic growth.
There have been reports that the Business Growth Fund, Britain’s most active equity investor in private companies, had delayed a £500 million fundraise because of purported reticence from British pension funds.
Andy Gregory, the chief executive of the BGF, said “progress had been modest” on the Mansion House Accords, under which pension funds agreed to invest 5 per cent of their assets in UK private companies by 2030.
Supporters of encouraging more pension investment in UK assets point out that the schemes have huge tax advantages, financed by UK taxpayers, and that the policy could help promising British companies to have a greater economic impact as well as funding infrastructure and housebuilding projects.
Sceptics have warned that directing pension money towards assets based on political aims may produce lower returns and therefore provide smaller pensions, or cost corporate sponsors more money.
Of the new fund, the government said it would
“seek to deliver strong long-term returns for pension providers and their members by investing in successful UK companies. By helping innovative businesses scale up, commercialise new technologies and create skilled jobs, it would support economic growth while helping pension savers benefit from larger retirement pots and stronger local economies.”
Will it get it right this time?
We’ve heard too much from recent governments on new funds. We’ve not seen enough investment from pensions. Nest and Border to Coast are exceptions, they are supported by Government and taxpayer. Commercial funds must feel it a no-brainer to invest for long term growth.
Let’s hope we’ll get it right this time. I fear we’ll only achieve the targets for investment with fiscal intervention from John Healey. De-risking pensions for two decades hasn’t done Britain much good.
