Private Equity News | Sebastian McCarthy 9 Nov 2023
A cohort of venture capital firms have joined forces in a bid to boost UK pension investments in unlisted equities. Some 20 VC firms with a combined £25bn in assets under management have signed up to a pledge aimed at forging closer ties with UK pension investors. The signatories have committed to attracting UK pension funds as limited partners into the funds they manage and advise.
They have also pledged to partner with pension investors to consider how they can produce effective investment structures, as well as share best practice and rules of engagement for working in private markets with defined contribution (DC) schemes, particularly trustees and their consultants/advisers.
The signatories include Northern Gritstone, Beringea, Frog Capital, IQ Capital and Octopus Ventures. Launched by the British Private Equity and Venture Capital Associ ation (BVCA), the Venture Capital Investment Compact (VCIC) comes amid a wider government drive to encourage UK pension scheme investment into venture, growth and other private capital funds.
The VCIC builds on the Mansion House Compact announced by Chancellor Jeremy Hunt in July 2023, which saw nine of the UK’s largest DC pension providers commit to the objective of allocating at least 5% of their default funds to unlisted assets by 2030. According to the City of London Corporation, only 0.5% of UK DC pension assets are invested in unlisted UK equities such as venture capital and growth equity.
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 grow and create jobs.”
£25bn | Combined assets of the 20 VC firms that have signed the compact
The compact aims to build on the Government’s broader proposals for UK pension schemes, such as the Long-term Investment For Technology and Science (Lifts) initiative that looks to unlock UK institutional and private investment from UK DC pension funds into science and tech companies in the country.
The signatories said in a statement that they recognised that the Government’s aim to unlock over £50bn of capital by 2030 is a “unique opportunity for pension savers and could enable them to benefit from higher potential net returns whilst increasing UK-based funding for the UK science and technology sector”.
Andrew Williamson, managing partner at Cambridge Innovation Capital and chair of the BVCA’s venture capital committee, said: “The Venture Capital Investment 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.”