A venture capital firm has launched the first-ever fund devoted to helping UK pension funds invest in British start-ups and scale-ups.
Future Planet Capital’s new British Co-Investment Fund (BCF) will channel pension investment into some of the UK’s fastest growing and most innovative businesses in a move that has been praised as “much-needed” by start-ups and pensions managers alike.
The fund will allow pension scheme managers to allocate capital to UK venture investment across the whole of the UK, aiming to direct up to £1bn into fast-growing companies over its lifecycle.
British pensions have not had any avenues to invest in venture capital in recent years, with regulators wary of the investment classes’ lack of liquidity and the higher fees that VC and private equity firms tend to charge. This is despite many foreign pension funds already being big players in the UK’s venture capital scene.
Both main political parties vowed to reform pension funds and the regulations around private capital in the recent general election campaign. And earlier this year, pension and venture capital bosses from the likes of Legal & General and the Unilever pension fund formed an ‘expert panel’ devoted to funnelling precious capital into private companies.
The UK is ‘catching up’
It means that Mobius Life, the pensions solutions provider that the fund was launched in partnership with, will offer its pension trustees and asset managers access to venture capital investments through a ‘blended feeder fund’ structure.
Speaking in an interview with the Today programme, Douglas Hansen-Luke, Future Planet Capital’s executive chairman, said: “Over the last few years, British pensions haven’t had any vehicles in which they can invest in venture capital within the regulations and haven’t had the resources to do it either.
“What we are aiming to do is to actually provide vehicle which allows us to manage to manage it professionally for them so that they can work with us… and do the same as many overseas pensions do already, catching up with the rest of the world.”
The fund’s establishment will no doubt be welcomed by Chancellor Rachel Reeves, who has previously called on the pension sector to invest more in the UK. On entering office, Reeves called on pensions funds to “learn lessons from the Canadian model and fire up the UK economy”.
Julius Pursaill, an independent strategist who advises the Cushon Master Trust, said: “There are a number of good reasons to support the UK Growth agenda and innovations like the British Co-Investment Fund, play an important role in delivering on this objective.
“[It will drive] financial growth, whilst also offering access to innovative, impact-focused sectors such as climate technology and artificial intelligence, which can help secure the future for pension savers and broader society.”
Hansen-Luke added: “The BCF is a much-needed solution to support pension managers in meeting the objectives of the Mansion House Compact whilst also helping British pension savers benefit from the opportunities presented by the UK’s most exciting private companies.”