UK Private Capital raises alarm over ‘slow and unclear’ progress from Mansion House signatories
A leading private capital trade body has raised the alarm over the lack of urgency from Mansion House signatories to meet their commitments and increase allocations into venture capital.
UK Private Capital, which was previously known as the British Venture Capital Association, has called on signatories to work faster, after uncovering limited evidence of any significant investment into venture capital funds, despite committing to do so.
Under the Mansion House accord, seventeen major UK defined contribution pension providers committed to investing at least 10 per cent of their default funds into private markets by 2030, in a bid to unlock £50bn for UK businesses and industries.
Signatories included Aegon UK, Mercer, Aviva, Legal & General and Phoenix Group.
Minimal engagement
But UK Private Capital found VC funds were finding it “difficult to engage with pension funds”, with only six firms in active negotiations with signatories across April and May, out of the 83 that the trade body spoke to, to secure funding.
VC funds also said that the process of securing commitment is slow, with only two legally binding commitments between firms and UK DC default funds aligned with the accord or the Mansion House compact, which was signed in 2023, having been achieved.
Meanwhile, three quarters of respondents said they felt that they had not yet been able to engage meaningfully with DC pension providers, with many calling for the government to do more to facilitate investment into private capital.
The limited progress has severely impacted VC funds’ outlook on the accord, with nearly half of the respondents no longer optimistic that the agreement will deliver greater investment by 2030.
UK Private Capital Chief Executive, Michael Moore, said: “Only a small number of venture capital and growth equity funds have received any investment from any UK pension funds so far, despite efforts from both the pensions and private capital industry.
“Most of the firms we spoke to told us that the process was slow, unclear, and that many pension providers are simply not yet equipped to invest in the asset class.”
Ensuring long-term outcomes
However Mercer chief executive, Phil Parkinson, said pension funds need “to be patient” in order to ensure “long-term investment outcomes”.
He said: “Despite this initial momentum and the support from pension funds there are still some hurdles to overcome.
“Mercer like other pension funds have capital to invest but will be patient to ensure that the very best, investible, and commercially viable projects are there, as we will not compromise on quality. Without further acceleration in the pipeline, particularly in the UK, these barriers will remain.
“Our overriding concern is to meet our trustee and fiduciary duties to members, a point we made clear when we signed the Accord.
“The priority now must be on the Government’s own commitment as part of the Mansion House Accord to build a credible pipeline of investable opportunities that can attract long-term pension capital.”
Pension push
The accord is part of a government push to boost investment into venture capital through UK pension funds in order to boost economic growth, allow businesses to be internationally competitive and create stronger returns for savers.
While VC firms and the signatories welcomed the accord, many providers opposed the newly-passed Pension Schemes Act.
The bill ping-ponged between the two chambers, as the opposition refused to back down on the government’s controversial proposal for mandation.
The legislation ran into multiple obstacles as the government tried to push through the power which would have allowed them to compel private pension schemes to invest a minimum proportion of assets into specific areas.
But the opposition benches and figures from across the City voiced concerns over the power, arguing it meant that pension schemes could not act in saver’s best interests and could be used to fund political “pet projects”.
The government finally conceded and tabled further amendments weakening the power to soothe peer’s concerns.
The amendments meant that saver’s best interests would elbow out mandation while restrictions were also placed on when the power could be used.
The new text states that the government would have to publish a report identifying barriers to UK and private markets investment, and to set out the steps it has taken to “address any such barriers”.
Moore added: “While government has made a welcome push for momentum with the passing of the Pensions Schemes act, there needs to be a much greater sense of urgency if the Mansion House agreements are to be successful.”