The UK government is encouraging investment in productive finance, however, attendees of the British Venture Capital Association (BVCA) summit in London heard this week that there is a lack of urgency within the pensions industry.
Speaking at the summit, Anne Glover, co-founder and chief executive officer of Amadeus Capital Partners and former chair of BVCA, said that while over the last three years venture capital saw renewed focus from institutional investors, the urgency to invest was “completely missing”.
The Association of British Insurers (ABI) released figures benchmarking the Mansion House Compact, which called for 5% investment in unlisted equities such as venture capital and growth equity, showing progress at 0.36% within signatories’ default portfolios.
Speakers during the conference cited a lack of enablers and the need to break down barriers in order to see more progress.
Glover said she does not support ‘mandation’ as a tool to increase investment in productive assets, however, she said there has to be an incentive for chief investment officers to allocate to riskier assets.
“My fear is that the 10% and the 5% will go to bridges, which is what we were talking about. Nothing wrong with bridges, they’re needed, but we need about 0.5% of pension assets allocated to venture capital, and I haven’t said in the UK, but that would be great if it was in the UK,” she said.
Glover noted that even a global allocation would be “fine” because it would introduce pension funds to that asset class and show how it performs.
She pointed out that at the moment, there is a lot of “dabbling” on the part of asset owners, as well as market mapping without potential investors moving on to action, which she said is “what really matters”.
In a separate session, Emma Douglas, wealth policy director at Aviva, said these assets have to be held for a “very long time” and therefore it is important that they are bought at the right price, as that will affect members.
The challenge, she said, is having investable opportunities that work well for defined contribution schemes to hold, which is part of the crucial enablers that the industry is calling for.
She pointed out that this was acknowledged by pensions minister Torsten Bell, who said: “We can’t have everyone trying to invest in the modern bridge that we’re building”, to which she added that “there’s got to be enough supply that we can all choose and buy at the right price, because that is absolutely crucial”.
Maria Busca, ABI’s manager of long-term savings policy, said that the progress of the Mansion House Accord, which was launched earlier this year, is more about enabling investments to happen than the proportion of investment.
She pointed out that the Mansion House Compact was about resourcing, boosting expertise, researching and developing investment solutions to increase allocation to unlisted equities, with several signatories launching their long-term asset fund (LTAF) solutions.
She shared that further progress was made, however, she said it is important to understand the context under which pension funds operate, such as cost minimisation, competition dynamics, the regulations, such as the charge cap and the misalignment between the Department for Work and Pensions (DWP) and the Financial Conduct Authority (FCA) in that space.
“Meaningful progress cannot happen without addressing these critical enablers, and that’s why it’s in line with the expectations so far,” Busca noted.
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