Three VC investors with Cambridge operations – Amadeus Capital Partners, Cambridge Innovation Capital and IQ Capital – are among 20 of the UK’s leading Venture Capital and Growth Equity firms fighting to unlock British pension investment in high growth companies through a unique initiative. The move carries a potential £50 billion payback.

The trio help provide the backbone to the new Venture Capital Investment Compact engineered by the British Private Equity and Venture Capital Association (BVCA).

The Compact commits signatories to working closely with the pension funds which were enlisted in the Government’s Mansion House agreement.

Andrew Williamson, Managing Partner of Cambridge Innovation Capital, is Chair of the BVCA’s Venture Capital Committee.

Earlier this summer, the City of London Corporation coordinated the Mansion House agreement, committing nine of the UK’s largest pension funds to the objective of allocating at least five per cent of their default funds to unlisted equities by 2030.

The new Venture Capital Investment Compact builds on that agreement and will help to unlock over £50bn of new capital by the end of the decade.

The signatories of the new Compact represent much of the UK VC and growth equity market, support more than 1,800 companies and have over £25bn of Assets under management.

BVCA chief executive Michael Moore, said: “Many overseas investors have jumped at the chance to invest in – and benefit from – the performance of innovative UK firms. UK savers must have access to the same opportunity.

“We want to seize this opportunity for British pension savers to benefit from returns garnered from VC innovation in the UK, while helping businesses to grow, succeed and create jobs.”

Chancellor Jeremy Hunt, has pitched in. He said: “This compact is a huge win – demonstrating that our world-renowned Venture Capital firms stand ready to help our pension providers allocate funding to our high growth companies. This could boost British pension pots to the tune of £1k.”

And Williamson added: “The Compact demonstrates that the VC industry is committed to partnering with pension schemes to help them address the barriers they face when allocating to this asset class, in order to allow savers to benefit from the higher potential net returns that can arise from investment in unlisted equity such as private capital funds as part of a diversified portfolio.”

According to the City of London Corporation, only 0.5 per cent of UK DC pension assets are invested in unlisted UK equities such as venture capital and growth equity. The Mansion House agreement and Venture Capital Investment Compact will seek to address this.

As part of the new Compact, signatories voluntarily commit to:-

Attracting UK pension funds as limited partners into the funds they manage
Partnering with pension investors to consider how they can produce effective investment structures to suit their needs
Sharing best practice/rules of engagement for working in private markets with DC schemes, particularly trustees and their consultants/advisers.
The BVCA has also committed to a range of measures to support the outcome of the Compact, including the establishment of the Pensions & Private Capital Expert Panel – a group made up of senior private capital and pensions industry representatives, as well as leading advisers and consultants – to provide advice and guidance to firms on the delivery of the Compact.

it will host the Pensions Capital Deployment Summit in 2024, bringing together pensions investors with private capital fund managers in a bid to plan and support the development of new fund vehicles.

New training programmes will be created alongside the pensions industry to help deepen the pension trustees’ knowledge of private capital and improve trustee capability.

Research has found that UK managed Venture Capital and Growth Equity funds generated annual returns of 16.7 per cent and 12.8 per cent, respectively, over the 10 years to December 31 – exceeding the 6.5 per cent p.a. achieved by the FTSE All Share Index – showing the value these funds bring.

This is in part why international pension schemes invest so much into UK funds – notably more compared to British pension schemes. In 2022, Swedish pension funds were the largest source of pension scheme capital for UK venture funds.

Life sciences and DeepTech companies could benefit hugely from the new initiative. Steve Bates, CEO of the UK BioIndustry Association, said: “Nearly two-thirds of pension savers recently surveyed said they want to know where their money is being invested.

“The detail matters – people need to know if their money is being invested in another online betting app or a company from Cambridge that is trying to understand why some people survive cancer whilst others die, with the aim of developing therapies that will allow us all to survive.

“Alchemab in Cambridge and many other companies recently identified by global consultants PwC as the most innovative and groundbreaking life science companies operating in the UK right now, have the potential to transform patient care in the NHS and become global success stories, delivering the return on investment that pension savers need for their retirement.

“The Compact is a critical step to unlock new capital to accelerate their growth and to realise those ambitions.”

Signatories to the new venture include: IQ Capital; Cambridge Innovation Capital; Amadeus Capital Partners; OSE; Albion; Molten; Octopus; BGF; Frog Capital; Epidarex; Abingworth; Notion; MMC; Lakestar; SV Health Investors; Beringea; Northern Gritstone; Balderton; Local Globe; NorthEdge; Returns Data.