Some of Britain’s biggest pension firms, including Legal & General and Phoenix Group, will meet for a secret summit in the Square Mile this week to discuss how to pump billions of pounds of retirement cash into the country’s start-ups, City A.M. can reveal.
The meeting, dubbed the Mansion House Forum, comes one year after a group of the UK’s top pension managers – collectively managing around £400bn – pledged to invest five per cent of their assets into unlisted companies by 2030. Bosses are now gathering to draw up a to-do list for the new government and assess progress made on the initiative so far, City A.M. understands.
“What is important at this meeting is to make sure we’re all at the same point and understand what’s going on, and then take that to ministers going forward,” Michael Moore, chief executive of the British Venture Capital Association (BVCA), who is attending the meeting, told City A.M.
The summit will form the latest effort from the City and Westminster to get the UK’s near £2.5 trillion pool of defined contribution pension cash flowing into private markets and infrastructure projects.
Last July, then-Lord Mayor of the City of London, Sir Nicholas Lyons, and former Chancellor, Jeremy Hunt, hailed a “historic turning point” as they corralled nine pension firms into signing the so-called Mansion House Compact, in which they pledged to dramatically scale up their private and unlisted investment by the end of the decade. The move would boost savers’ retirement pots to the tune of £1,000 a year and could yield £75bn investment in total, the government claimed at the time.
Unlike last year’s compact, however, details of this week’s forum have not been announced and the summit will be held behind closed doors. The City of London Corporation will host the meeting and Lyons, now chair of the Phoenix Group, will moderate the discussion, City A.M. understands.
All of the nine signatories of the deal, including Aviva and L&G, are expected to be in attendance, alongside the Association of British Insurers and the BVCA.
News of the meeting comes just after the new Chancellor Rachel Reeves told business leaders yesterday she would be leaning on the country’s retirement funds to fuel the growth of the economy.
“We will turn our attention to the pensions system, to drive investment in homegrown businesses and deliver greater returns to pension savers,” she said in her inaugural speech as Chancellor.
Speaking as shadow Chancellor last year, she also threatened to force pension money managers into committing more cash to start-ups and private companies, a move which has unsettled some corners of the industry.
Pension funds have been seen as a largely untapped pool of capital by Britain’s tech and start-up sector as it looks to fill a gaping funding gap and compete with the US. The dearth of investment has been blamed in part for scores of firms looking to overseas investors for cash and eventually floating on international stock exchanges.
Such investment has typically been off limits to pension funds due to the higher fees charged by venture capital and private equity managers.
While the signatories of last years’ compact have on paper committed to increase the scale of their funding for start-ups, some in the City have been critical of the progress on the plans so far.
“It’s all talk and no action, but I’m hoping for some tangible progress soon,” one venture capital executive told City A.M. earlier this year. “My view is that the carrot approach doesn’t work with these pension funds. The stick needs to come out soon unless there is some action.”
L&G last month took among the largest steps towards accelerating its start-up investment with a new private market fund for some 5.2m of its members. In a statement yesterday, the FTSE 100 firm’s boss, Antonio Simoes, told City A.M. he welcomed the government’s push to put pension cash to use in “productive” assets.
“With the right partnerships between the public and private sector, the investment of pension capital into productive assets can help ensure the UK remains competitive on the international stage, support financial adequacy for individuals, and drive broad benefits for the UK economy,” he added.
Phoenix Group is also planning to launch a new multibillion-pound fund to invest in high-growth companies and boost pension returns.