Leaders of the government’s productive finance investment project were out in force at the Pensions UK Investment Conference in Edinburgh this week, stepping up efforts to get more pension investment into venture capital.
Senior representatives from the Office for Investment, the British Business Bank (BBB), and the National Wealth Fund sought to flesh out the investment narrative and explain why pension funds should be confident about investing in UK private markets.
Leandros Kalisperas, the BBB’s chief investment officer with investment experience at the Universities Superannuation Scheme and West Yorkshire Pension Fund, said that “the opportunity for pension funds to generate increased returns from investing in ventures is really, really significant”.
“It’s simply a great opportunity that pension funds need to come to on their own journey.”
Leandros Kalisperas, British Business Bank
The BBB will be creating “choice architecture” for venture capital investing, he explained, as there isn’t the same development of an asset class within venture capital as in other private asset classes, so it is more of “an emerging discovery process”.
Kalisperas also dismissed any need for mandation: “It’s simply a great opportunity that pension funds need to come to on their own journey.”
Eddie McAvinchey, director in banking and investments at the National Wealth Fund, said the agency had a three-pillar strategic plan to drive £100bn of investment across the UK economy over the next five years.
The pillars are clean energy, accelerating place-based investments around the UK, and strengthening sovereign and strategic capabilities, including the defence sector.
McAvinchey explained that the National Wealth Fund had a much clearer focus on risk than in the past, which should appeal to pension funds with little experience in private and place-based investments.
“We will move away from some higher-risk equity investments,” said McAvinchey. “Part of that is about a very deliberate focus on achieving profitability.”
The National Wealth Fund will still back infrastructure equity projects, he said, as well as making large-scale equity available for some projects, but would focus more on “infrastructure debt and guarantees, as well as some debt into industrial sectors”.
Earlier in the day, pensions minister Torsten Bell also encouraged pension schemes to consider venture capital allocations, highlighting that recent performance from the asset class’s top quartile had outstripped that of other private markets.
“I’ve been very encouraged by the conversations that are ongoing between some UK pension schemes collaborating on how we do things differently,” Bell said. “There is absolutely room, for example, for jointly owned venture capital vehicles.”
Additional reporting by Nick Reeve.
