Pension funds that don’t back UK assets should be named and shamed, Phoenix boss says
Pension funds that don’t invest in UK assets should be named and shamed, the architect of the Mansion House Compact has said, as he called for “bold” action to address problems in London’s capital markets.
Sir Nicholas Lyons, chairman of Phoenix Group, said transparency was the best way to catalyse more investment into the UK by the sector.
“Bold is the key word,” he said in an interview with the Telegraph.
“I think the biggest risk is that we’re not bold enough in what we do. I don’t think we can tinker any more. We need to have big ideas and be bold.”
Sir Nicholas said disclosure requirements were preferable to setting specific targets for the proportion of funds allocated to UK assets.
“We’re not the government’s lackeys, but I do believe very strongly that if you’re going to put your customers into illiquid asset classes, you don’t want to expose them to political risk, regulatory risk, currency risk, so you will have a natural domestic bias.
“I’ve personally therefore taken the view that you don’t actually need to specify that a certain amount of that needs to go into the UK market, because I think it’s a logical thing for people to do.”
Latest pension funds intervention
The remarks mark the latest intervention from Sir Nicholas after he warned the government against setting mandates for pension funds to invest in UK equities.
Speaking at an event at the Guildhall last month, he said: “I think we need to leave it to the private sector to make the right decisions around domestic buyers to listed equity capital.”
His views were echoed by British Business Bank CEO Louis Taylor, who said: “I think there are other ways of incentivising than actual mandation and I think that might go against the spirit of an open UK economy.”
Sir Nicholas added that the government should instead “retain the threat of mandation to help concentrate their minds.”
Some private funds who would stand to benefit from the rule-change have welcomed the move. James Codling, managing partner of VC firm Volution, which this week launched a new $100m fund, told City PM: “I support anything that encourages greater investment into the venture ecosystem.”
Though others have issued a stern rebuke of the proposals. Simon French, chief economist at Panmure Liberum, said it was “hard to overstate how perverse a pension reform this would be.”
The Mansion House compact – an agreement by pension funds aimed to encourage the deployment of fund assets into unlisted equities, is set to be updated with a new agreement spearheaded by the Treasury later this month.