Britain’s major asset managers are in advanced negotiations to create a multi-billion pound investment fund to promote UK start-ups and stem the flow of technology firms snubbing London for New York, a key official working on the proposal told reporters.
A seasoned banker and current lord mayor of London named Nicholas Lyons said the ‘Future Growth Fund’ would aim to invest up to 50 billion pounds ($63.11 billion) from British pension pots in rapidly expanding technology and biotech companies.
In order to gain “buy-in” for the proposals, Lyons said he was participating in advanced discussions about the fund’s design with a number of FTSE 100 asset managers and insurers. He added that the proposals might be completed by the end of this year.
He claimed that the AustralianSuper and Canada Pension Plan Investment Board funds—both of which have a substantial presence in London—were “eating our lunch” and offered them as examples of funds to imitate.
The discussions take place at the same time as initiatives by British lawmakers and regulators to quicken financial sector reforms intended to entice more international corporations to invest in Britain and join its stock market after UK-based chip designer ARM decided to hold its initial public offering in New York.
According to Lyons, the fund would function as a sizable venture capital fund with a concentration on the UK, with an emphasis on supporting unlisted start-ups before they enter the public markets.
Between being unlisted and getting listed, there is currently a precipice, Lyons told reporters. Currently, these businesses must follow the money. If the money is in North America, they will travel there.
PENSION FUND WORRIES
According to Lyons, the government might mandate that all UK-defined contribution pension funds place a portion of their assets in the proposed fund, but he added that he did not view this as a deal-breaker.
Retirement plans are unlikely to appreciate any effort to require them to participate in risky start-up companies, pension experts cautioned.
Con Keating, head of research at Brighton Rock Group, an insurance provider for pension schemes, said, “[This] runs counter to a long UK tradition of allowing investment as seen appropriate by its owners or their agents.”
Lyons, who previously worked at JPMorgan and Lehman Brothers, has made consolidating pension fund investment in Britain a key focus of his role in the largely ceremonial one-year post as lord mayor of London, which he began in November.
He left his position as chairman of the insurance company Phoenix Group to take over the position.
TAX BREAK
According to Lyons, Britain could take note of best practices from nations with a more active retail investment culture, such as Canada, the United States, and Sweden, which granted capital gains tax advantages to investors to boost support for local companies.
“That’s a pretty easy way to do it,” he added. “If you want people to buy British, if you want to create more liquidity in the UK.”
In order to effectively compete with the United States and senior positions in industries like private equity, Lyons also supported industry proposals for higher pay for top executives in Britain.
When Julia Hoggett, chief executive of the London Stock Exchange, claimed last week that British companies’ boardroom pay levels made it difficult to recruit talent, fair pay advocates criticized her.
“We must turn the dial. We must discuss the significance of wealth creation as a catalyst for job growth, according to Lyons.
