Blow to London Stock Exchange as Scottish Widows plots huge selloff
The London Stock Exchange has been dealt another hammer blow after it emerged one of the UK’s biggest pension funds plans to massively cut its allocation for UK equities.
The Edinburgh-based business, which manages as much as £72bn in pension assets, intends to slash the UK equities allocation in its highest growth portfolio from 12 per cent to as little as 4 per cent, the FT reports, while its most conservative portfolio will see the UK allocation cut from 4 per cent to just one per cent.
The move will see billions pulled out of London’s public markets over the coming months, with the plan set to be carried out by the end of January 2026. An increase in exposure to US equities was also planned as part of the “indicative” proposals.
It’s the latest sign of Scottish Widows’ retreat from investing in the UK after it emerged the Lloyds-owned business was the only major UK pension fund that refused to sign the Mansion House Accord, a voluntary pact in which funds committed to increase their exposure to UK private assets. The Treasury has handed itself powers to enforce the terms of the accord if funds fail to comply.
The withdrawal from UK equities has also been linked with the Accord, amid speculation that funds will sell down their UK stock holdings to compensate for the increased spend on UK private assets, to keep their overall exposure to the UK unchanged.
‘Just another blow’
Simon French, Chief Economist at Panmure Liberum, said: “This was an inevitable reaction to the recent Mansion House Accord which – despite the non-participation of Scottish Widows – pushes/strong-arms UK pension flows into private assets over the next five years.”
Scottish Widows told the FT that its “new and enhanced pension proposition — Scottish Widows Lifetime Investment — takes a market weight allocation to global equities by default, in line with similar propositions from other pension providers”.
It added it would review these weightings on an annual basis and “where appropriate may include a home bias”.
Neil Wilson, UK investor strategist at Saxo Markets, told City PM: “It’s just another blow.
“UK pension funds are down from 50 per cent UK equities to 4 per cent in 25 years.
“How can we expect to generate economic growth and prosperity when our capital markets are not doing what they are supposed to do and support UK companies?”