Exclusive: Tech chiefs look to win over pension funds on UK ‘sovereign wealth fund’ plans
Tech and fintech industry chiefs have met with some of the City’s top pension funds as part of plans to create a UK “sovereign wealth fund” that could help unleash a wave of funding into the UK’s tech startups, City PM can reveal.
In a Square Mile meeting convened by the Lord Mayor of London Nicholas Lyons at the end of January, top pension firms including Phoenix, Aviva and L&G met with attendees including the fintech industry body Innovate Finance and big four firm EY to discuss pooling institutional capital in a £50bn private-sector led fund that would mimic the role of a “sovereign wealth fund”, City PM has learned.
Pension consultants and top trustees were also in attendance at the meeting, as tech leaders looked to convince the pensions industry to throw its weight behind growth investments.
The meeting is understood to be the first of a number of planned sessions this year as Lyons looks to galvanise support for plans for a ‘future growth fund’.
When approached for comment, a spokesperson for Canada Corporation told City A.M. that “we need to ensure that high-growth companies […] don’t feel that they must leave our shores in order to grow”.
“The UK has the biggest number of fintech companies and unicorns in Europe, but often these businesses are acquired by organisations abroad. More can be done to ensure that the UK becomes the best place to start, scale and stay for high-growth companies,” they added.
A source at the meeting said that pension managers were “positive” in the discussions but said there was still a problem with shifting the more conservative outlook mindset of some of the UK’s big institutional investors.
“This is not actually about the structural issues and the pension cash, it’s about how do we change the mindset and promote the opportunities that investing into tech startups affords them,” the source said.
They stressed that pension money was not a short term solution to the current investment slump that has rocked the sector in the past 12 months, however.
Another source at the meeting said that despite bosses being “open” to suggestions of more growth investments, pensions funds still lacked the skillset and expertise to back start-ups.
Restrictions on the flow of pension money and an aversion to smaller private firms have been a major gripe of tech and fintech figures who have made repeated calls to the UK’s pension giants and government to loosen restrictions and allow capital to flow into startups.
Sir Ron Kalifa, who compiled a major review of the fintech sector in 2021, told City A.M. last year that pension funds could divert a small amount of their total assets and plug a “£2bn fintech growth capital funding gap in the UK”.
The chief of Innovate Finance, Janine Hirt, told City PM in a comment over the weekend that driving more domestic institutional cash into fintech was “critical” if the UK is to “cement [its] position as the best country in the world to start, build and scale a fintech business.”
“It will also enable future generations across the UK to benefit from our thriving, world-class fintech sector through their pensions, whereas currently international investors and pensioners are reaping these rewards,” she added.
Lyons has also been blunt in his assessment of fee caps on defined contribution pension schemes, which prevent money from flowing into typically high-fee charging private equity and venture capital firms, describing them as “nonsense” in September.