Potential consolidation in LGPS may discourage local investments, claims a UK private equity specialist

In a significant move, seventeen of the largest workplace pension providers in the UK have agreed to invest at least 10% of their defined contribution (DC) default funds in private markets by 2030. This decision, part of the new Mansion House Accord, aims to unlock £50bn in investment for the UK economy.

The push into private markets is progressing, with increased engagement resulting in early investment vehicles evolving. Private capital, increasingly viewed as compatible with sustainability goals, is becoming a popular choice due to private capital firms often taking active ownership, allowing them to influence portfolio companies directly.

Tom Taylor, head of the policy department at the British Private Equity & Venture Capital Association (BVCA), spoke in favour of the UK government's planned creation of larger Local Government Pension Scheme (LGPS) pools. He believes that this merger will enable more sophisticated private market investments and support regional economic growth across the UK.

However, Taylor has expressed concerns that this merger might undermine support for smaller, local venture capital investments. He raised these concerns at the UK Sustainable Investment and Finance Association (UKSIF) spring conference in Edinburgh.

One such investment that has closed at over $100m is the Bluefront seafood fund. The fund falls under the categories of Agri-food, Blue economy, and EU funding. Another notable investment is the National Wealth Fund's £50m investment in UK grid flexibility.

Rachel Reeves, the UK chancellor of the exchequer, announced plans to merge LGPS assets and consolidate DC schemes into "megafunds" to unlock £80bn (€94bn) of investment for infrastructure projects and businesses of the future. This move is expected to provide a boost to the UK economy, particularly in the areas of development finance, energy access, energy transition, and infrastructure.

Despite these positive developments, it is crucial to manage liquidity in DC schemes at the scheme level to make private capital investments more feasible. Taylor believes that this progress is evident in the increasing capital commitments being made in the DC and private capital world.

In a separate interview, Rekha Unnithan from Nuveen was also featured in a 3-minute interview, discussing private equity and venture capital. The interview falls under the categories of Private equity and Venture capital.

As the UK moves forward with these investments, it is essential to ensure that the benefits are distributed evenly across the economy, supporting both large-scale projects and smaller, local ventures. The future of UK investment looks promising, with a focus on private markets and sustainable goals.

Potential consolidation in LGPS may discourage local investments, claims a UK private equity specialist