The British Business Bank (BBB) has been working in consultation with pension funds on designing an investment vehicle to attract UK pension funds into venture capital and growth equity.
Speaking at the Pensions Age Spring Conference yesterday (24 April), The British Business Bank (BBB) Patient Capital Advisory Services (British Growth Partnership) managing partner, Ian Connatty, said this work has been going on for more than a year between the BBB and pension fund stakeholders.
Connatty also highlighted the importance of pension funds rebalancing a portion of their portfolios toward innovation-focused investments.
These, he argued, are not only financially prudent in a changing economic landscape, but essential to shaping the society that pensioners will eventually retire into.
“There is an opportunity to prescribe and the means to capture it through the vehicle that we’re creating,” he explained.
He noted the strength of the UK’s innovation sector, with a “strong” pipeline of high-potential companies growing faster than their global counterparts.
“One of the reasons why the UK represents an opportunity for investors is the strength of our innovation economy. We have a strong pipeline of high-potential companies… and it is growing faster than the global average, including the US and China,” he stated.
However, he said that despite the UK being “very good” at starting companies, it could be “so much better” at scaling them up.
Connatty said this challenge is linked directly to UK companies struggling to access domestic patient capital, which “holds them back from fulfilling their full potential”.
“We shouldn’t be a country that only incubates the companies developing these technologies but can’t scale them from employment and spinoff effects that we like to see in the broader economy,” Connatty said.
“In a nutshell, we have been very good at starting companies here in the UK, it’s now all about scaling them up.”
Connatty also acknowledged the hesitancy among pension funds to invest in venture capital, indicating concerns about fiduciary duty.
“Investment decisions must first and foremost meet trustees’ fiduciary duty, which provide both value for money and the best outcomes for members,” he said.
He also pointed out that structural issues such as fragmented private markets, illiquidity, and high management fees have historically deterred pension fund involvement in venture and growth equity.
Despite these hurdles, Connatty stressed that pension funds should engage more with the UK’s innovation-focused investments.
