Phoenix Group and Schroders launch £20bn private market investment scheme
The UK’s largest pension business Phoenix Group has partnered with global investment manager Schroders with the aim of deploying £10-20bn of investor funds into private markets over the next decade.
Future Growth Capital (FGC) will launch with an initial £1bn commitment, growing to £2.5bn over three years.
FGC will be the first private market investment manager in the UK to promote the objectives of the Mansion House Compact. Announced in July 2023, it aims to unlock up to £50bn of investment in high-growth companies by 2030.
The Compact includes an agreement between nine of the UK’s largest defined contribution pension providers to allocate five per cent of assets in their default funds to unlisted equities over the same period.
The Mansion House Compact members announced at the time were Aviva; Scottish Widows; L&G; Aegon; Phoenix; Nest; Smart Pension; M&G; and Mercer.
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Initially FGC will leverage Schroders’ long-term asset fund (LTAF) investment platform, providing investment advice to the fourth and fifth LTAFs planned for launch by Schroders’ dedicated private markets business, Schroders Capital, in the UK.
A key focus of FGC will be investing on behalf of pension savers to grow the UK’s companies of the future. FGC will provide long-term financing for innovative, growing businesses, helping to create jobs and boost the UK economy.
UK chancellor of the exchequer Rachel Reeves welcomed the new fund, saying it “will ensure that more of people’s pension savings are invested into the UK’s highest growing companies”.
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“The UK’s private companies are an untapped universe of investment opportunity,” said Schroders group chief executive officer Peter Harrison (pictured left). “By stimulating investment into our private markets, our partnership will address the multiple challenges of the looming retirement crisis and boosting UK growth.
“By connecting long-term savers with our country’s most inventive companies, Future Growth Capital will help more people to fund a secure a comfortable retirement, whilst supporting businesses to grow and thrive right here in the UK. In doing so, we’ll be making the UK an even more attractive place to live, work, retire and invest.
Phoenix Group group chief executive officer Andy Briggs (pictured right) added: “For too long, pension savers in the UK have received lower returns than their counterparts in the P7 such as Australia and Canada, partly because the UK allocates much less capital to private market assets than other developed countries.
“By forming FCG with Schroders, it will help us to deliver our goal of giving UK long-term savers a way to invest in a more diversified portfolio with the potential for higher returns, from a broader range of assets. This facility will also play a significant role in the future design of our flagship defaults. FGC will be a long-term, patient capital investment manager, constructed to ensure that customer protection remains at its core by taking a blended approach to asset allocation.”
FGC will, subject to regulatory approvals, invest in the UK as well as globally.
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