Future Capital Partners, a joint venture between Schroders and Phoenix Group, has launched two funds targeting private markets after receiving regulatory approval in October 2024.
The two strategies – one global and one focused on the UK – are designed to offer pension funds exposure to a range of assets including private equity, venture capital, infrastructure, property and private debt. Each targets an annualised investment return of 10% after fees.
The UK LTAF has made its first investment in line with the government’s Long-Term Investment for Technology and Science, or LIFTS, initiative, with the backing of a £250m investment from the British Business Bank.
“The UK is a hub of innovation, the third largest venture capital market in the world, and the leading supplier of unicorn businesses in Europe.”
Ped Phrompechrut, Future Growth Capital
Ped Phrompechrut, chief investment officer at Future Growth Capital, said: “Often overlooked is that UK private markets are broader and deeper than many recognise and offer a rich seam of investment return potential. The UK is a hub of innovation, the third largest venture capital market in the world, and the leading supplier of unicorn businesses in Europe.”
Future Growth Capital aims to deploy £10bn-£20bn over the next decade into private markets, including substantial investments in the UK.
Separately, Scottish Widows has announced plans to launch an LTAF later this year, subject to regulatory approval. It will be run by Carne Group, with Aberdeen Investments and BNP Paribas Asset Management appointed to run growth and credit strategies respectively.
The LTAF will also make use of Scottish Widows’ parent company Lloyds Banking Group’s expertise in UK private markets assets including private equity, social housing and private credit.
Aberdeen’s growth sub-fund will allocate to private equity, infrastructure and UK venture capital, as well as real estate and private credit. BNP Paribas will invest in diversified private credit assets, Scottish Widows said in a statement.
Kevin Doran, chief investment officer, added that the LTAF’s open architecture structure “gives us full control and future-proofing on how and where we invest within our LTAF”.
“With full control of our own sponsored vehicle, we have the visibility of cash flows from members’ contributions, right through to asset flows,” Doran continued. “This limits the need for precautionary liquidity, making sure our members get the full benefit of their investments in private assets.”
Scottish Widows and Phoenix Group are signatories to the Mansion House Compact, through which pension providers pledged to allocate 5% of their investment portfolios to UK productive finance.
Rumours swirl of government mandation of UK investments
A report in the Financial Times this week gave voice to rumours that the government was considering mandating UK private markets investments if pension funds are seen to be falling short of expectations.
The article said the government was considering increasing its 5% target to 10%, citing industry sources.
An announcement is expected next week relating to progress against the Mansion House Compact’s goals.
Recent research from LCP shows that defined contribution master trusts were increasingly exploring private markets investments, with allocations growing.
However, the supply of assets remains a concern. The People’s Pension has said that its intention to invest £4bn in private markets – including a “substantial” allocation to the UK – is dependent on a sufficient pipeline of high-quality assets.
