[LONDON] The British government launched on Monday (Oct 20) a club comprising 20 of the country’s largest pension funds, to try to drum up coordinated backing for local infrastructure, as major pension funds pledged 2.6 billion pounds (S$4.52 billion) to UK assets.
The “Sterling 20” initiative includes money managers Legal & General, Aviva and M&G, as well as Britain’s biggest private pension scheme, the Universities Superannuation Scheme.
Britain has pursued a range of reforms to stimulate private investment and speed up economic growth, although the total of the various investments announced on Monday was lower than past rounds.
“Getting Britain building again”
L&G said it would invest two billion pounds in UK “impact” projects over five years, including developing 10,000 affordable homes and funding regeneration schemes, as part of coordinated announcements.
Austalia’s largest pension fund, AustralianSuper, also announced it would invest 500 million pounds in UK rental homes, which has been a booming sector in Europe.
While the government has launched various initiatives to boost private investment, some finance firms have privately questioned their effectiveness and the scarcity of so-called shovel-ready projects. Chancellor of the Exchequer Rachel Reeves’ Budget next month could also test business confidence as she considers tax rises.
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“This is about getting Britain building again: bringing our savings, our investors and our regions together to deliver the homes, infrastructure and industries that will drive growth and create good jobs in every corner of the country,” Reeves said in a statement.
Reeves has stepped up pressure on pension funds to do more to support the UK economy, following years of outflows from domestic assets.
The government this year said it will take a “reserve power” to force pension funds to invest in the domestic economy – a move that is fiercely opposed by investment managers, who believe the choice of where to place savings is solely their clients’ prerogative.
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Sterling 20 members will work with the government and the City of London Corporation to channel pension savings into British infrastructure and high-growth firms such as in the artificial intelligence sector, the government said, without providing further details.
“(L&G’s) commitment will help unlock the investment needed in productive assets across the country – creating jobs, strengthening communities, and driving both regional and national growth,” said L&G CEO Antonio Simoes.
Pension fund Nest also said it would invest about 100 million pounds in UK assets through its money manager Schroders Capital, part of a wider 500 million pound extension of its private equity investment mandate.
While UK pension funds doubled their investment in unlisted equities over the past year, figures published last week by the Association of British Insurers showed they have remained below the levels needed to meet a pledge to the government to support private businesses.
Eleven pension providers have signed up to a separate pact to invest 5 per cent of their funds in UK private assets. They currently invest only 0.6 per cent, the Association of British Insurers said.
Pension providers have cited cost concerns and performance fees as barriers to further boost investments in private markets.
Sterling 20 will be formally launched at the UK government’s Regional Investment Summit in Birmingham on Tuesday, which will be attended by a range of investors, including Australia’s largest pension funds.