In investment and politics, consensus is helpful, but you need action to get a result.
The government wants to see more pension capital invested in British companies to drive growth. Investors, pension funds and entrepreneurs agree. Pension savers should benefit, and a lot of work is going on to make sure this happens.
So, change is coming to our pensions, but it’s not coming quickly enough.
Over the past year I have been talking to investors, pensions professionals, academics and accelerators, start-ups and their founders. This much is clear from them all: those founders need investment now.
If they can’t get funding then their businesses, and the country at large, will miss out.
Everyone I speak to wants to see the success of the Mansion House compact – commitments by defined contribution pension providers to allocate 5 per cent of their default funds to unlisted equities by 2030. And they want to see the impact soon.
The UK can’t afford to let these businesses leave for markets where they think they could raise cash more easily – chiefly the US.
It cannot stand by as some of our most innovative and important companies get all their funding from overseas, making them highly likely to move abroad in future.
Yet despite the clear direction from government, and action from investors, large barriers to investment remain in place.
If an individual pension fund manager wants to diversify their portfolio, and make even a relatively small venture capital investment, there are significant obstacles.
Pension funds are not set up to pick and choose individual growth businesses. They do not have the resources to talent spot direct investment opportunities, place people on boards, and nurture and encourage investees.
Investing via specialist venture capital funds has not typically suited their fee structure and they have to find an effective way to invest in privately held companies while ensuring liquidity in their portfolio.
It’s hardly surprising that they default to other investments.
With institutional investment platform Mobius Life, we at Future Planet Capital have now created a model to overcome these barriers.
It will allow pension scheme managers to allocate capital to a new British Co-Investment Fund, helping to provide up to £1bn of pension investment. The fund, in turn, will provide capital for venture investments in UK businesses, while keeping within their fee and liquidity requirements.
None of this suggests a revolution in pension investment. The 5 per cent Mansion House target over the next five years represents a cautious shift in capital allocation. Venture investments will only ever be one small part of a broad mix of assets in anyone’s pension portfolio.
But the total impact of this change across the vast pool of pension capital can make a significant difference to the prospects of British companies and options open to pensions savers.
