London Stock Exchange chief: Risk aversion is holding back our capital markets
British investors need to better understand risk if the UK is to realise the potential of its capital markets, the chief of the London Stock Exchange said today, as top City figures were grilled by MPs on an exodus of firms away from London.
Julia Hoggett, the chief of London’s bourse, was quizzed on the future of London’s capital markets by the influential Treasury Select Committee alongside City grandee Lord Hill, GSK chair Jonathan Symonds and the Lord Mayor of London Nicholas Lyons.
Speaking with MPs, Hoggett argued an aversion to risk was holding back UK investors from financing the growth of public and private companies.
“We need to recognise that stock markets are about risk capital,” she said. “We have to recognise that not every time, companies will succeed. Some will fail, and not every company will have the returns expected.”
Hoggett’s comments came as she mounted fresh calls on managers of pension funds to divert more cash into the UK’s stock market to spark the growth of companies.
“We’ve clearly got the desire and framework for it, but we’re not all providing financing and the rocket fuel that enables those companies to [grow],” she said.
Domestic pension funds’ holding of UK equities has slumped in the past two decades and pressure has been growing on top institutional investors to pump more cash into British companies in recent months.
Lyons, who is on secondment from his role as chair of pensions giant Phoenix, has also spearheaded calls for a £50bn pooled growth fund among pension firms to flow into growing private UK companies.
Policymakers and regulatory officials have been looking to breathe life into London’s markets amid fears that growing firms are looking overseas to better attract cash from investors.
A slew of reviews have been launched to overhaul the regulatory frameworks around the public markets, with the latest review into investment research launched by ministers earlier this year.
However, the City has been rocked by firms ditching London for New York in recent months. Chipmaker Arm snubbed London in favour of New York earlier this year, while building supplier CRH confirmed today it would swap its London listing for the US.