Aegon and NatWest Cushon are among UK pension providers that have either committed to provide funds to the new British Growth Partnership, announced by Rachel Reeves in tonight’s Mansion House speech, or are working towards doing so.
Aegon UK has been announced as a cornerstone investor. NatWest Cushon has committed to working with the fund, with a view to placing capital with it. The two providers have combined assets worth over £219 billion and have both agreed to work with the British Business Bank with a view to investing in the UK growth companies of the future, subject to commercial and regulatory steps and, where appropriate, agreement from the trustees. Reeves also announced that, alongside Phoenix Group, the British Business Bank has completed its LIFTS investment in Schroders Capital, to create a new £500 million investment vehicle to invest in UK science and technology. The government expects 20 per cent of the LIFTS capital to be invested into life sciences.
This partnership will be launched by the British Business Bank in 2025 to invest in high quality UK growth companies seeking investment to scale their operations.
The British Business Bank will establish the British Growth Partnership, a fund managed by British Patient Capital, with a view to encouraging more pension fund investment into the UK private sector. The initial fund will seek to raise hundreds of millions of pounds, including a commitment from the British Business Bank itself, to invest in some of the opportunities in the Bank’s venture capital pipeline.
This latest pension reform announced by Reeves is being seen by many in the industry as the Mansion House Compact Mark 2.0 – with a specific vehicle to drive investment into these assets, rather than a commitment to boost private market investments by a set date in the future.
Aegon says it will be providing a cornerstone investment into this new partnership, pending the regulatory approval, investment due diligence and commercial discussions.
This investment will form part of Aegon UK’s largest workplace default, the £12bn Universal Balance Collection (UBC) fund, which announced plans earlier this year to evolve and incorporate private market investments with a view o delivering better risk adjusted returns for the schemes 700,000 members.
Aegon UK said that by partnering with the British Business Bank, it seeks to benefit from their scale, access, and experience investing in innovative funds and companies. Aegon’s allocation will be held within one of three LTAFs it will hold, the first of which was launched with BlackRock earlier this month. It is targeting a 15 per cent net internal rate of return (IRR). Charges have been increased by 3-4 bps in the UBC to accommodate the allocation. This was communicated to members in June.
The Cushon Master Trust is looking to make an investment in the initial fund, again subbed to due diligence and agreement from trustees. NatWest Cushon is also engaged in constructive dialogue with Future Planet Capital.
Meanwhile the British Business Bank also announced it had completed its £250m investment alongside Phoenix Group with Schroders Capital under the Long-Term Investment for Technology and Science (LIFTS) initiative to create a new investment vehicle that is accessible to pension funds and other institutional investors. The BBB said its £250m investment has been matched by £250m of pension investment from Phoenix Group.
Phoenix’s investment will be made through its new private markets joint venture with Schroders, Future Growth Capital.
Following approval from the UK’s Financial Conduct Authority in September to launch the first ever Long-Term Asset Fund (LTAF) dedicated to UK venture capital, Schroders Capital, the $97.3bn specialist private markets business, is expected to begin making investments before the end of the year.
The LTAF will offer defined contribution and other institutional investors the opportunity to participate in the growth and development of groundbreaking UK late-stage companies focused on technology and science with 20 per cent of the fund expected to be invested in life sciences.
Talking about the new British Growth Partnership, British Business Bank CEO Louis Taylor says that these announcements are an endorsement of the work the British Business Bank is doing to support pension funds and other institutional investors to access venture capital opportunities.
He adds: “We are delighted to be working with Aegon UK and NatWest Cushon as we prepare to launch the British Growth Partnership in 2025, demonstrating our objectives and vision for investing in growth are highly aligned.”
Mike Holliday-Williams, CEO, Aegon UK, said: “In June we announced plans to revolutionise our largest workplace default to include private market investments. This partnership with the British Business Bank further demonstrates our cutting-edge capabilities, with the aim of providing workplace savers with access to innovative investment opportunities that have previously been out of reach to DC pensions.”
Lorna Blyth, MD of investment solutions, Aegon UK, said: “We are on the path to evolve the Universal Balanced Collection fund and turn it into a default fund fit for the future. These changes build on our recent investment into our first bespoke Long Term Asset Fund and focus on robust risk management and diversification. We believe these changes will offer our members improved outcomes and value for money. By partnering with the British Business Bank, we can unlock investment into businesses with high growth potential through the British Growth Partnership, and capture the full commercial potential of world-class breakthrough technology companies.”
NatWest Cushon CEO Ben Pollard adds: “As a signatory to the Mansion House Compact, we see the UK growth agenda as a win-win. By investing in impact focused sectors and UK high growth companies, we’re helping secure better outcomes for pension savers and a better future for them and broader society. Initiatives like the British Growth Partnership are critical to giving pension schemes access to these investment opportunities.”
Other reforms announced in her speech include a ‘rebalancing’ of the regulatory system to drive economic growth and competitiveness. The Chancellor has written to the Financial Conduct Authority, Prudential Regulation Committee, Financial Policy Committee and Payment Systems Regulator to ensure a greater focus on supporting economic growth.
The Financial Ombudsman Service framework will also be modernised so that it continues to play a vital role for consumers to get redress while giving clearer expectations around its decisions for consumers and for financial services firms.
The government will also consult on replacing the current Certification Regime, which applies to staff below senior management level, with a more proportionate approach that reduces costs so that businesses are freed up to focus on growth.
The government is launching a pilot to deliver a Digital Gilt Instrument, using distributed ledger technology (DLT), demonstrating the government’s commitment to innovation in the financial services sector.
The government is also consulting on introducing a new framework for UK-based captive insurance companies to make the UK insurance market a more attractive hub for businesses seeking efficient risk solutions.