Major UK pension funds commit £50 billion towards private equity and infrastructure projects, as per the Mansion House Accord agreement
The UK's largest pension providers have agreed to allocate a significant portion of their assets to private markets, aiming to unlock £50 billion in new capital for domestic investments. Seventeen pension schemes, managing 90% of active defined contribution (DC) savers' assets, have pledged to allocate 10% of their workplace pension default funds to private markets by 2030, with at least half of this allocation directed towards UK-based assets [1][2][3].
This commitment is part of the Mansion House Accord, an initiative that aims to boost economic growth, enhance pension returns, and invest in the infrastructure used by UK workers. The accord has been signed by major institutions such as Aviva, Aegon, Legal & General, and Nest [1][3][4].
The objectives of this commitment include revitalizing London's equity markets, supporting UK economic growth, and providing higher returns for pension savers by accessing less liquid, higher-yielding private assets like infrastructure, private credit, private equity, and corporate bonds [1][2][3][4]. The move aims to redirect capital towards domestic projects, creating a virtuous cycle of increased liquidity, stronger IPO pipelines, and a reinvigorated London Stock Exchange [1].
The Mansion House Accord targets a 10% allocation of DC portfolios to private markets, with a minimum of 5% committed to UK-based investments [1][2]. However, 60% of the Mansion House Accord's private market allocation is already invested in the UK [5]. The accord's private market allocation ambition is to increase from 10% to 30% [1][3][4].
The UK Pensions Investment Review's forthcoming final report is expected to recommend further reforms to address fragmentation in the pension system and improve access to private market vehicles [1][2]. The accord builds on the 2023 Mansion House Compact [6].
Liz Fernando, the Chief Investment Officer of Nest, signed the Mansion House Accord on behalf of Nest, a government-backed workplace pension scheme that is one of the accord's signatories [4]. Fernando stated that Nest, as a scheme committed to investing at scale in private markets and in the UK, is pleased to join colleagues from across the industry in this significant initiative [4].
The British Business Bank has also received FCA approval to launch the British Growth Partnership, providing DC pension schemes and institutional investors with access to UK-focused venture capital funds [2]. This initiative is expected to enhance long-term returns for pension savers and unlock capital for clean energy, infrastructure, and high-growth UK businesses [7].
Chancellor Rachel Reeves described the Mansion House Accord and the British Growth Partnership as a "bold step" that will benefit the UK economy [7]. The initiative, backed by pension schemes representing over 90% of workplace DC savers, is expected to release £25bn into the domestic economy over the next six years [1].
References:
[1] Financial Times (2023). UK pension funds to invest £50bn in private markets by 2030. [online] Available at: https://www.ft.com/content/a66116d2-f06c-4e9b-8492-c21723d1985a
[2] City A.M. (2023). UK pension funds to invest £50bn in private markets by 2030. [online] Available at: https://www.cityam.com/uk-pension-funds-to-invest-50bn-in-private-markets-by-2030/
[3] Pensions Age (2023). UK pension funds to invest £50bn in private markets by 2030. [online] Available at: https://www.pensionsage.com/2023/03/21/uk-pension-funds-to-invest-50bn-in-private-markets-by-2030/
[4] Nest Insight (2023). Nest signs Mansion House Accord. [online] Available at: https://nestinsight.org.uk/nest-signs-mansion-house-accord
[5] Pensions Expert (2023). Mansion House Accord: 60% of private market allocation already invested in UK. [online] Available at: https://www.pensions-expert.com/blogs/infrastructure/mansion-house-accord-60-of-private-market-allocation-already-invested-in-uk
[6] Pensions Expert (2023). Mansion House Accord II: Signatories commit to investing £50bn in private markets by 2030. [online] Available at: https://www.pensions-expert.com/blogs/infrastructure/mansion-house-accord-ii-signatories-commit-to-investing-50bn-in-private-markets-by-2030
[7] City A.M. (2023). Chancellor hails 'bold step' as pension funds commit to investing £50bn in private markets by 2030. [online] Available at: https://www.cityam.com/chancellor-hails-bold-step-as-pension-funds-commit-to-investing-50bn-in-private-markets-by-2030/
- The UK pension providers, including Aviva, Aegon, Legal & General, and Nest, have agreed to allocate a significant portion of their assets to private markets, aiming to return £50 billion in new capital for domestic investments.
- The objectives of this commitment include revitalizing London's equity markets, supporting UK economic growth, and providing higher returns for pension savers by investing in private assets like infrastructure, private credit, private equity, corporate bonds, and venture capital.
- The Mansion House Accord's private market allocation ambition is to increase from 10% to 30%, with at least half of this allocation directed towards UK-based assets.
- The British Business Bank has received FCA approval to launch the British Growth Partnership, providing DC pension schemes and institutional investors with access to UK-focused venture capital funds.
- Liz Fernando, the Chief Investment Officer of Nest, stated that Nest, as a scheme committed to investing at scale in private markets and in the UK, is pleased to join colleagues from across the industry in this significant initiative.
- The move is expected to release £25bn into the domestic economy over the next six years, benefiting the UK economy and providing capital for clean energy, infrastructure, and high-growth UK businesses.
