The Chancellor Jeremy Hunt has revealed £250m will be channelled into two new private sector investment vehicles today as ministers look to kickstart the flow of cash from pension funds into tech start-ups.
In a statement, Hunt said the Treasury would commit the cash to two successful private sector bidders and look to provide a channel for “over a billion pounds of investment” from pension funds.
The moves come after Hunt struck a deal with seven of the country’s top pension money managers in the summer, dubbed the Mansion House Compact, which saw them commit to investing five per cent of their assets to start-ups by 2030.
“Tomorrow’s Autumn Statement will be a huge step towards delivering our Mansion House Reforms and unleashing the full potential of our pensions industry,” Hunt said.
Faster pension reform has been near the top of the wishlist for City bosses as Hunt prepares to deliver his autumn statement on Wednesday.
London Stock Exchange Group boss David Schwimmer told reporters on Friday that “recognition” was needed of UK pension funds’ lacklustre holding of equities when compared to international peers.
UK pension funds make up just four per cent of the public markets in the UK, compared to some 39 per cent two decades ago, according to data from capital markets think tank New Financial.
The flow of pension money into the private markets has been even weaker, where money has typically been shut out by higher costs and greater risk.
Hunt told the CBI conference yesterday ff you’re trying to scale up a tech firm in the UK “you’re more likely to get investment from the Canadian pension funds than the British pension funds”.
However, minsters and the tech industry are hoping for a potential £75bn wave of investment to be unleashed into private smaller tech companies through the reforms.
Plans to get pension money into start-ups have also been backed by 70 of the top venture capital firms in the UK.
A new “Growth Fund” managed by the state-owned British Business Bank will also receive £50m worth of capital from the pubic coffers under the plans announced today.
“The Growth Fund will draw on the BBB’s strong track record in accessing the best investment opportunities in the UK’s most promising businesses, which has been welcomed by eight pension schemes and fund managers,” the Treasury said.
A further £20m will be channelled into growing university university “spin-outs”, tech firms formed from research in British universities.