Plans for DC schemes to invest 5 per cent of default funds in private market by 2030 are not “massively ambitious” according to Michael Moore, the chief executive of the British Private Equity and Venture Capital Association.
Moore was setting out the progress that had been made to date since the first Mansion House Compact which has seen senior and technical experts from across pensions and private capital market come together on a Pensions and Private Capital Expert Panel.
Answering a question on what success might look like Moore said that plans set out by Rachel Reeves last week, in her own Mansion House speech, looked to build on her predecessor’s announcement. “If we can get to these levels of investment sooner that would be great,” he added.
He pointed out though, that as a comparison around 0.36 per cent of UK DC pension funds were invested in private market assets at present.
Moore said that there was a “general consensus” that more DC money would be flowing into this sector in coming years. “There are a number of shared goals between the two sectors and while we might not have agreed on everything, nor on all aspects of how this can work successfully, it is clear that there is no going back on this.”
Moore said the Pension and Private Capital Expert Panel was working on delivering tangible solutions to support increased pension funding into private markets. Its interim report was published earlier this year, and Moore confirmed its final report would be published in February 2025.
He said there has been a “real spirit of collaboration” with both sides looking to understand the potential issues the other faced.
He added this mentality had also fostered a degree of political consensus on this issue. Moore pointed out that while the new government had been quick to distance itself from some of the previous administrations spending and taxation plans, this was in stark contrast to the tone struck by the new Chancellor at last week’s Mansion House speech.
“The tone was noticeably different and she have credit to the previous chancellor Jeremy Hunt and the industry for their work in this area.” He added that it seems apparent that Reeves wants to build on this and ensure developments now continue at pace.
This he said can help address two key policy aims: the need to deliver better returns for pension savers, helping address current problems with savings adequacy. By utilising DC funds, the government also hopes to tap into new sources of capital, particularly for scaling-up and growing private businesses.
Moore said that much of the UK private market capital currently focuses on start-ups rather than scaling business. At present these funding streams are largely coming from large US venture capital funds, which as a result are taking some of these potentially successful UK start-ups out of the country. He also pointed out there was currently 16 times as much funding from overseas pension funds in UK private markets, than from domestic pension funds.
Moore added that private capital investment also supports the mature economy, particularly in relation to companies involved in the green transition and digital disruption.
Moore also stressed that he was no fan of government mandates to invest in the UK. He pointed out that Canadian and Australian funds have invested in the UK “because they see it as an opportunity”. He adds: “As someone who represents the UK private equity and venture capital market we are aware that we need to compete with opportunities overseas, and are confident we can do so.”
