Venture Capital Investment Compact launched to unlock pension fund investment in high-growth companies

November 13, 2023
1 minutes

The UK Government continues its efforts to boost investment in high growth companies across the country. A number of the UK’s leading VC and growth equity firms have signed the “Venture Capital Investment Compact” pledging to support efforts to unlock British pension investment in high-growth companies.  This Compact is backed by both the Chancellor, Jeremy Hunt, and the British Private Equity and Venture Capital Association.

The Compact represents the deployment-side of the Mansion House agreement from this summer. As part of that initiative, the City of London Corporation assisted with a pledge from some of the UK’s largest pension funds to allocate at least 5% of their default funds to unlisted equities by 2030. This is in contrast to the City of London Corporation’s estimate of just 0.5% currently, or a potential increase of over £50 billion of new capital by the end of the decade. 

As part of the new Compact, signatories voluntarily commit to a range of actions. For example:

  • Attracting UK pension funds as limited partners;
  • Working with pension funds on best practice for structuring;
  • Rules of engagement for working in private markets. 

This represents a significant opportunity for both GPs to obtain new investors in their early-stage funds, but also for LPs in benefiting from a more tailored offering. 

Regardless of who wins the next general election, initiatives such as this are likely to become reality. The Shadow Chancellor, Rachel Reeves, recently backed similar calls to create such a fund. Over the last year there has been much discussion that the absence of British pension funds is one of the reasons for the perceived decline in listings for British biotechs, compared to those in the US.