By Iain Withers
LONDON (Reuters) – British insurer Phoenix Group and fund management company Schroders have agreed to launch a private markets investment firm to channel up to 20 billion pounds ($25.68 billion) into unlisted assets over the next decade.
Asset managers have been jockeying for a competitive edge in private markets, with several such as BlackRock and Amundi buying specialist firms to strengthen their position.
The two British companies said on Wednesday their venture, called Future Growth Capital (FGC), would be launched subject to regulatory approvals to align with the UK government’s aim of driving more pension savings into private businesses.
Phoenix has made an initial commitment of 1 billion pounds to the venture, with the aim of deploying 2.5 billion pounds over three years, the statement said, adding that investments would be made in the UK and globally.
The 50:50 venture will buy assets across green technology, real estate, private equity and private debt, Schroders’ CEO Peter Harrison told reporters.
Phoenix – which has an existing investment mandate with Schroders’ rival abrdn – has opted to partner with Schroders as it sees it as market-leading in private assets, the insurer’s CEO Andy Briggs said.
Some pension funds have expressed concerns that private markets expose them to bigger risks, partly because they tend to be more illiquid meaning it is harder to cash out.
Harrison said in his view investors were too exposed to the Magnificent Seven U.S. tech companies, while Briggs said he believed a diverse portfolio reduced risk.
The companies’ statement said the venture would support Britain’s Mansion House Compact (MHC), a policy launched by the previous Conservative government to help direct private pension cash into unlisted companies.
Under the compact, insurers and pension funds have voluntarily committed to invest 5% of their direct contribution pension schemes in unlisted companies by 2030.
The new Labour government elected this month, which has said it faces a 22 billion pound overspend in the country’s finances, has backed the MHC, and launched a review of the pensions industry to try to increase private investment.
($1 = 0.7788 pounds)
(Reporting by Iain Withers, editing by Sinead Cruise and Barbara Lewis)
