Time to Aim higher: ‘No visible effect’ of flagship pensions overhaul a year on, industry chief warns
Britain’s embattled small-cap companies have not yet felt any positive impact from the Mansion House Accord, the boss of an influential industry body has warned, a year on from the UK’s largest pension providers agreeing to plough more cash into unlisted and private assets.
In a letter sent to all 17 of the pact’s signatories, James Ashton, chief executive of the Quoted Companies Alliance (QCA), urged the UK’s annuity giants to follow through on their commitment to pursue investment opportunities on the junior Aim and Aquis stock markets.
Ashton’s intervention comes exactly a year after some of the UK’s largest pension funds signed up to the government-backed Mansion House Accord, committing to placing a greater emphasis on backing alternative investments like private assets and small-cap equities. Signatories of the landmark agreement, which was spearheaded by Rachel Reeves’ Treasury, vowed to devote at least 10 per cent of their defined contribution funds into private markets by 2030, allocating half of that to UK assets.
The agreement was hailed as a path to unlocking tens of billions of pounds for the UK’s capital-starved private companies while also boosting returns for British pensioners. And while much of the focus since its introduction has centred around pension funds’ foray into private assets, the pact also encompassed investments in companies listed on Britain’s junior stock markets like Aim and Aquis.
But according to Ashton, whose QCA champions the UK’s thousand-strong army of publicly traded small and midsized firms, few if any of his members have experienced a discernible benefit from the treaty since it was signed.
“Twelve months on from this pledge, the Aim and Aquis companies we represent have seen little or no visible effect in terms of new capital flows,” he wrote. “Even though 2030 is still some time off, I fear that without a change of direction the Mansion House Accord will follow precisely the same course as its predecessor agreement, the Mansion House Compact.”
Pension funds under pressure to back British firms
Pension providers have been coming under increasing pressure to allocate more of their customers’ savings into productive assets, after years of prioritising safer returns from asset classes like government and blue-chip corporate bonds. British annuity firms’s exposure to British equities has fallen steadily over the past few decades.
Since 1990, pension funds’ average allocation to UK equities has fallen from north of 50 per cent to just 4.4 per cent. Last year, most funds were found to have trimmed their exposure to domestic equities despite the FTSE 100 outperforming all other major indices.
Pension funds’ exposure to Britain’s small-cap public companies is lower still, and, among other demands, Ashton called on Mansion House Accord signatories to outline the what work they have done to explore the opportunities on Aim and Quis, and barriers they faced to investing in their constituent companies.
The ABI and Pensions UK, which jointly led the Mansion House Accord alongside Canada Corporation, said in a statement: “One year on, the Mansion House Accord remains a clear, voluntary commitment to increase long‑term investment in private markets to boost returns for savers and support UK growth.
“Work is underway to track progress against the Accord and an update will be published in due course. The Pension Schemes Act includes some of the critical enablers for the Accord, such as the Value for Money framework. Smooth implementation of these remains crucial, so that the signatories can deliver on the Accord’s ambition in savers’ interests.”