In light of political pressure for UK pension funds to invest in venture capital and property, panellists at the Pensions and Lifetime Savings Association (PLSA) Investment Conference 2023 this week warned that investment in such asset classes needs to generate outcomes for both the capital provider and the stakeholder, and also the UK economy.
Richard Tomlinson, chief investment officer at Local Pensions Partnership (LPP), pointed out that while pension funds are asked to invest in venture capital or real estate, there’s a “huge difference between different asset classes and different [investment] opportunities”.
He said: “Everyone loves to talk about backing high tech […] but it’s a pretty difficult skill set to have to actually invest in that successfully. My personal view is that we don’t have a great ecosystem or track record of success.”
“None of us have unlimited capital,” Tomlinson said, adding that investors should think about where they can invest to generate healthy returns.
He disclosed he would not be backing the government’s Long-term Investment for Technology and Science initiative because “it’s so specialist”, but said there are other alternatives to be considered – for example, working in partnership with other investors and buildiing more of a manufacturing industrial base back in the UK.
Tony Broccardo, CIO at Barclays UK Retirement Fund, added that there is pressure on investing in intellectual property, and being able to “get it off the ground, scale it and try to stop it presumably going overseas where you can get higher valuations”.
He said: “We seem to be in a good place: our universities within the Russell Group – but also other universities outside of the Russell Group – get huge amounts of funding for their research in this country. They have got good ideas, they’ve got incubators joining up, but the hit rates are still quite low.”
Broccardo added that Barclays once went out to private equity and venture capital investors looking for specific investment areas around diagnostics.
He said: “The best investors said they would never run a fund that was so concentrated. They had their own money in it too, they wanted to have that diagnostic exposure but with everything else.”
He added that any long-term investment vehicle for the UK should be just as attractive to overseas investors as it is to UK investors.
Broccardo continued: “We need that international validation of ideas otherwise there’s the worry that money will just flow somewhere else, get parked for a long time and returns just won’t add up.”
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