20 leading firms sign Venture Capital Investment Compact to boost pension fund investment in high-growth companies
The Venture Capital Investment Compact is a commitment made by 20 leading Venture Capital (VC) and Growth Equity firms in the UK to support efforts in unlocking British pension investment in high-growth companies.
The Compact builds on the Mansion House agreement, which committed nine of the UK's largest pension funds to allocate at least 5 of their default funds to unlisted equities by 2030.
The signatories of the Compact represent a significant portion of the UK VC and growth equity market, supporting over 1800 companies and managing over PS25 billion in assets, aiming to unlock over PS50 billion of new capital by the end of the decade, benefiting both British pension savers and businesses.
The Chancellor of the Exchequer, Jeremy Hunt MP, said:
“This compact is a huge win – demonstrating that our world-renowned Venture Capital firms stand ready to help our pension providers allocate funding to our high growth companies. This could boost British pension pots to the tune of £1k.”
Robert Whitby-Smith, Partner of Albion Capital Group LLP who attended the round table discussions comments: “As active venture capital investors over nearly 30 years, we have seen the consistent power of venture capital to deliver attractive returns to investors by unlocking entrepreneurship and innovation. We are proud to work alongside other founding signatories to help realise the extraordinary potential of the UK science and technology sector for the benefit of UK long-term savers, the economy and society”.Robert Whitby-Smith, Partner of Albion Capital who attended the round table discussions comments: “As active venture capital investors over nearly 30 years, we have seen the consistent power of venture capital to deliver attractive returns to investors by unlocking entrepreneurship and innovation. We are proud to work alongside other founding signatories to help realise the extraordinary potential of the UK science and technology sector for the benefit of UK long-term savers, the economy and society”.
According to the City of London Corporation, only 0.5% of UK DC pension assets are invested in unlisted UK equities such as venture capital and growth equity. The Mansion House agreement and Venture Capital Investment Compact will seek to address this.
As part of the Venture Capital Investment Compact, signatories voluntarily commit to:
- Attracting UK pension funds as limited partners into the funds they manage.
- Partnering with pension investors to consider how they can produce effective investment structures to suit their needs.
- Sharing best practice/rules of engagement for working in private markets with DC schemes, particularly trustees and their consultants/advisers.
The BVCA has also commit to a range of measures to support the outcome of the Compact, including:
- The establishment of the Pensions & Private Capital Expert Panel, a group made up of senior private capital and pensions industry representatives, as well as leading advisers and consultants, to provide advice and guidance to firms on the delivery of the Compact. The group will report on the Compact’s delivery and help design effective investment structures.
- Hosting the Pensions Capital Deployment Summit in 2024, bringing together pensions investors with private capital fund managers in a bid to plan and support the development of new fund vehicles.
- New training programmes will be created alongside the pensions industry to help deepen the pension trustees’ knowledge of private capital and improve trustee capability.
Research has found that UK managed Venture Capital and Growth Equity funds generated annual returns of 16.7% and 12.8% respectively over the ten years to 31 December 2022 – exceeding the 6.5% p.a. achieved by the FTSE All Share Index – showing the value these funds bring.
This is in part why international pension schemes invest so much into UK funds - notably more compared to British pension schemes. In 2022, Swedish pension funds were the largest source of pension scheme capital for UK venture funds.