Investment conglomerates in the UK vow to commit £50 billion towards private equity and infrastructure initiatives, as part of the Mansion House Accord agreement.
The UK government, through the Mansion House Accord, has initiated a significant move to invest billions of pounds into private markets and UK infrastructure by 2030. Seventeen defined contribution (DC) pension providers, including major institutions like Aviva, Aegon, Legal & General, and Nest, have committed to this initiative.
The Mansion House Accord represents a bold step forward, as it aims to allocate up to £50bn to private markets and infrastructure. This commitment is supported by the forthcoming final report from the UK Pensions Investment Review and the British Growth Partnership, which will provide DC pension schemes and institutional investors with access to UK-focused venture capital funds.
The private markets encompass a range of asset classes such as private equity, infrastructure, property, private debt, and other unlisted investments. Historically, these assets have delivered strong returns, averaging 13.1% per annum over 25 years to 2024, outperforming public equity benchmarks.
To facilitate this transition, the UK government is introducing the Pension Scheme Bill. The Bill includes structural changes aimed at making it easier and more cost-effective for pension schemes to invest in a wider range of assets, including private markets.
However, the Accord has faced criticism. Some industry figures, like deVere Group’s CEO Nigel Green, warn that directing pension funds heavily into private markets poses risks due to greater illiquidity, less transparency, and higher fees. He also criticizes the government for using pension assets to back political and economic ambitions rather than prioritizing saver interests.
Despite these concerns, the Mansion House Accord is expected to enhance long-term returns for pension savers, unlock capital for clean energy, infrastructure, and high-growth UK businesses, and boost economic growth. A minimum of 5% of the allocation will be committed to UK-based investments, and each signatory will target a 10% allocation of their DC portfolios to private markets.
The initiative, backed by pension schemes representing over 90% of workplace DC savers, is expected to release £25bn into the domestic economy over the next six years. With the British Business Bank's FCA approval to launch the British Growth Partnership, the UK is taking a decisive step towards a more diversified and potentially higher-yielding pension investment landscape.
References:
- The Pensions Regulator
- deVere Group
- HM Treasury
- The Mansion House Accord plans to allocate up to £50bn to private markets and infrastructure, with the aim of enhancing long-term returns for pension savers.
- This commitment is supported by the forthcoming final report from the UK Pensions Investment Review and the British Growth Partnership, offering access to UK-focused private equity funds.
- Private markets encompass a variety of assets, including private equity, infrastructure, property, and other unlisted investments, which historically have delivered strong returns.
- To facilitate this transition, the UK government is introducing the Pension Scheme Bill, aiming to make it easier for pension schemes to invest in a wider range of assets, including private markets.
- However, concerns have been raised by some industry figures, like deVere Group’s CEO Nigel Green, who warn about the risks of directing pension funds heavily into private markets due to greater illiquidity, less transparency, and higher fees.
- Despite these criticisms, the Accord, representing over 90% of workplace DC savers, is expected to unlock capital for clean energy, infrastructure, and high-growth UK businesses, contributing £25bn to the domestic economy over the next six years.
