Under the “Mansion House Compact” announced in July by finance minister Jeremy Hunt, 10 firms have volunteered to invest 5 per cent of their DC pension pots by 2030 in firms listed on the LSE’s AIM market, rival Aquis Exchange, or not listed at all to help them grow
Britain’s plans for nudging billions of pounds of pension cash into new UK firms to boost growth and increase stock market listings leave challenges of keeping investor fees competitive and finding sufficient funds.
Under the so-called “Mansion House Compact” announced in July by finance minister Jeremy Hunt, 10 firms have volunteered to invest 5 per cent of their DC pension pots, or nearly £50 billion ($62.31 billion) in total, by 2030 in firms listed on the London Stock Exchange’s junior AIM market, rival Aquis Exchange, or not listed at all to help them grow.
Hunt on Wednesday announced his first steps to help implement the compact, including a new fund set up by the British Business Bank for pension schemes to invest in growth firms. Such a pooled approach is aimed at small schemes that lack expertise to research fledgling firms.
The best way to achieve the important task of divesting asset allocation of direct contribution funds into small growth firms and unlisted equity is to put together a range of funds specially designed for collective investment, said Ros Altmann, a former UK pensions minister.
The government’s cocktail of measures could take time to make a measurable difference, nevertheless, given the difficult task in a fragmented sector where consolidation has barely started.
Investments from direct benefit (DB) pension schemes, one of the biggest parts of the sector, in UK listed firms have declined from 48 per cent in 2000 to just 6 per cent by 2020, or around £2 trillion, with cash redirected to less risky government bonds and heavily traded global blue chip stocks, as per New Financial think tank.
This has shrank London as a listings centre just as it faces tougher competition from New York, and also from EU centres since Brexit.