Making British pensions Canadian
The British pension system is trying to reconfigure itself with a more Canadian flavour (Unsplash/Erik Mclean)
Good morning. I spent last week at the Pensions UK investment conference in Edinburgh.
As some of our longer term readers may know, the British pension system is trying to reconfigure itself with something of a Canadian flavour.
That means bigger funds, investing in private assets through in-house teams - similar to the Maple 8.
Of course there’s an irony to this conference being held in Scotland, since Scottish pensions are devolved from Westminster and are therefore not going through the same reform process.
But the challenge for pension funds in England and Wales is how they get there.
While in Edinburgh I spoke to Leandros Kalisperas, chief investment officer at the British Business Bank, who is trying to help schemes along the journey having done it himself when he was chief investment officer at the West Yorkshire Pension Fund.
He said: “The model is really simple, in one sense. If you are coming into a new asset class you start with a fund of funds, you then get confident enough to pick a single fund, you then think ‘I like the opportunities in this fund’ so you become a co-investor and then you become confident enough to buy a company yourself.
“It is true that it is few and far between in the UK but, having seen that movie before and seen how a team can go from 50 people to 150 people over the course of six years, it is not impossible to believe that these huge funds are able to do that.”
Kalisperas is attempting to help British pension funds overcome the barriers to achieving this through the British Growth Partnership - an investment vehicle that will pool money from pension funds into UK venture capital. Its first close was at $269mn in November.
The British Business Bank will also publish information on its commitments to venture funds to encourage investors to crowd in.
Kalisperas pointed out that in the US, 70 per cent of venture capital comes from its institutional investor base but in the UK this is only 10 per cent.
He said: “The US has a 40-year head start on us and we have to walk before we can run.”
The key to success, he said, would be to create a series of “ecosystem effects”. He added that he would like to see the launch of two new growth funds a year to help pensions invest in venture capital.
Kalisperas said: “The debate on whether to have an in-house private equity team or not will continue and different pension funds will have different views.
“But in the spirit of what was in the consultation, when they were looking at what good looks like, there was a focus on in-house because you can bring down the costs.”
