Pension money managers hail ‘progress’ on start-up plans despite sluggish investment
Pension money managers that backed a plan to pump cash into start-ups last year have hailed “good progress” today despite still investing a fraction of their total assets into so-called growth companies.
The Mansion House Compact, drawn up by the government and Canada Corporation last summer, committed 11 of the UK’s top pension firms to investing five per cent of their assets into unlisted companies by 2030.
The deal was described as a “historic turning point” at the time which could yield a wave of investment into the venture capital sector and Britain’s growth companies.
However, an announcement from the Association of British Insurers, whose role it is to track progress on the pact, revealed that as of February just £793m was currently invested in unlisted equity assets, representing 0.36 per cent of the group’s total funds – well short of the eventual ambition of five per cent.
The group that backed the deal, including Aviva, L&G and Phoenix, collectively manage around £400bn.
After a request from CityAM, the ABI said it also did not have a comparator figure for last year, meaning it was unable to track how far this had improved in the past 12 months.
The figures may fuel concerns that little movement on boosting investment into the space despite the deal being greeted with huge fanfare last year.
A week after its announcement last July, a group of around 100 venture capital investors penned a corresponding agreement to welcome the flood of pension money into their own funds.
However, the two bodies have had little practical engagement with each other since then, City sources have told City A.M..
In its statement today, the ABI insisted that “good progress” had been made and said firms had taken strides to resolve the structural issues in the sector.
“The progress at this relatively early stage is encouraging,” said Yvonne Braun, ABI’s director of policy for long-term savings.
“It’s clear that signatories have laid strong foundations to start implementing the ambition in the Mansion House Compact to allocate five per cent of their default funds to unlisted equity.”
Firms had taken “key steps” including hiring the necessary staff and training up staff to invest in unlisted equities, the ABI said. Just one of the 11 signatories to the pact had not “taken steps to establish or expand their expertise in unlisted equity investment,” it added.
Last year’s deal was drawn up to solve a dearth of retirement money flowing into unlisted equities and fill a ‘growth funding gap’ in the UK. Pension money has traditionally been shut out of private markets due to the higher costs charged by money managers at VC and private equity firms.
Unlocking pension cash has been at the heart of Rachel Reeves economic plans. In an announcement last week, she pledged to bring forward sweeping reforms of the £2 trillion private pensions industry “to boost investment, increase pension pots and tackle waste in the pensions system”.
Several of the signatories have made movements to increase their investment activity in recent months, including L&G, which launched a private market platform for some five million members.
Phoenix has also reportedly drawn up plans for a private markets ‘superfund’.