The British Private Equity and Venture Capital Association (BVCA) has welcomed a voluntary agreement dubbed the Mansion House Accord made between the government and 17 UK pension funds to target a default allocation target of 10% to private assets (with at least 5% of the total allocated to the UK) by 2030.
If the target is achieved it would be a sizeable increase from the roughly 0.36% of UK pension assets held in unlisted equity assets.
BVCA chief executive Michael Moore said: “This agreement could be a huge step forward for the UK economy if the signatories follow through on their commitments.
“Right now, it is primarily overseas pension savers’ retirement funds that are benefitting from breakthroughs made by innovative British companies. UK venture and growth funds support the development of fast-growing British companies operating in sectors of the future such as life sciences, AI and net zero.
“That is why we value the assurances of the signatories that the accord, whilst expanding their focus to new areas such as infrastructure, maintains the pension industry’s resolve to increase investment in UK venture and growth equity funds.
“It is an important statement that the new accord does not dilute the commitments made under the previous Mansion House Compact.”
According to BVCA projections, the ten-year horizon internal rate of return for VC was 11% per annum for the ten years to 31 Dec 2023. This compares to 5.3% per year achieved by the FTSE All Share index and 7.5% achieved MSCI Europe index in the same period.
Overseas pension savers are benefiting from this growth and investment performance, with BVCA data showing that non-UK pension schemes are investing 16 times more in UK private capital funds than UK pensions do.
Signatories to the new commitment include Aegon UK, Aon, Aviva, Legal & General, LifeSight, M&G, Mercer, NatWest Cushon, Nest, Now: Pensions, Phoenix Group, Royal London, Smart Pension, The People’s Pension, SEI, TPT Retirement Solutions and the Universities Superannuation Scheme (USS).
Andrea Rossi, CEO of M&G plc, said: “Private markets play a fundamental role in shaping the world around us through long-term investment in real estate and infrastructure projects, alongside lending to and investing in companies that contribute to economic growth.
“By enabling and encouraging greater investment into these assets, individuals could benefit from enhanced returns, greater diversification and better value by having their pensions invested in this way.”
