A group of 20 UK pension funds and asset managers have come together to invest billions in the UK economy, specifically focusing on fintech infrastructure, housing, science and technology.
This group, known as the Sterling 20, are a collection of 20 companies, including big names like Aon, Aviva, Legal & General, Mercer, WTW, M&G, the Pension Protection Fund, Nest Corporation and the Universities Superannuation Scheme.
Announced at the Regional Investment Summit in Birmingham and reported in Finextra, this group is one of the biggest focusing on using pension capital to drive UK growth.
Billions Pledged To Support UK Businesses
The group’s announcement comes after the Mansion House Accord, which was signed earlier this year, pledged around £50 billion of collective pension investment into UK businesses and infrastructure by 2030.
According to Gov.uk, those who signed the Accord must invest 10% of their workplace portfolios in assets that boost the economy like infrastructure, property and private equity.
These won’t just help boost the UK’s economy, but will also provide good returns for savers.
“Every decision we make puts our members and their long-term outcomes first,” said Ian Cornelius, CEO of Nest. “We believe private assets can play a key role in delivering strong, consistent returns for them.” (Finextra)
Bringing More Investment To The UK
The Mansion House Accord will certainly be music to many UK businesses ears, especially as research from the government has shown that UK pension funds have increasingly been investing abroad.
According to gov.uk, only around 20% of Defined Contribution (DC) pension assets are now invested in the UK, down from 50% a 10 years ago. This has been driven by a move away from UK-listed equities into those further afield.
The problem is that whilst markets like the US, which has grown exponentially over the last few years, have generated returns, many argue that the UK is missing out by moving money away from home.
Conversely countries like Canada, New Zealand and Australia hold a considerable amount of assets domestically, helping power their local economies.
Backing The UK’s Next Tech Champions
Science Minister Lord Vallance recently called out for pension funds to back “the sci-tech unicorns of the 2030s”, specifically pointing to companies in areas like AI, biotech and quantum computing.
“The UK has deep pools of institutional capital, yet only a small fraction reaches our most promising growth companies” says Science Minister Lord Vallance at BVCA.
“There are far too many UK companies operating at the cutting edge of emerging technologies to which UK investors are underexposed,” he said. “Encouraging greater flows of capital into these sectors will help companies grow, create jobs and keep more of that value here in the UK.”
To help direct pension schemes, a new Innovation Cluster Map has been created to show which pockets in the UK are delivering outstanding research and commerce.
What Does This Mean For UK FinTech Startups?
For the UK’s fintech, AI and green energy industries, this is great news. UK fintechs have consistently topped the list of the UK’s most successful startups, with unicorns like Cleo, Monzo and Revolut driving millions in revenue. Not only does this signal a fresh injection of funds into the sector, it also means UK savers can capitalise on their success.
Janine Hart, chief executive of Innovate Finance, the trade body for UK fintechs, said: “Fintech is a huge driver of growth, but in order for the full power of our sector to be unlocked and help benefit this community and our entire economy, we need government and we need regulators to get behind us as well and support this sector.”
UK Pensions Enter A New Era
The news that more money will be directed to flow into UK startups is something to be celebrated, especially if they can provide strong returns for savers.
Not to mention, it’s set to provide a nice boost for the economy too.
With more than £2 trillion held in pension assets, the Sterling 20 could be a great way to bring investment back to the UK and continue driving the country’s startups forward.