Last summer, we welcomed the Mansion House Compact which asked signatories to allocate at least 5% of the DC default funds to unlisted equities by 2030 and increase the proportion of UK pension and other relevant investments in unlisted equities. However, so far, we’ve seen signatories allocate only 0.36% of their DC default funds—equivalent to £793 million out of a total of £219 billion assets.
We therefore sought to investigate this further by asking signatories exactly where they stand with their pledge. Below is a draft of letters sent to the 11 pension funds who signed this agreement.
Dear [Signatory],
The Quoted Companies Alliance (QCA) champions small and midcap companies that trade on AIM, Aquis and the Main Market, up to and including members of the FTSE 250.
Last summer we warmly welcomed the Mansion House Compact, to which you are a signatory.
It makes eminent sense for funds in search of better returns for retirees to invest in riskier, high-potential assets. For their part, small companies urgently need fresh capital to fund their ambition to grow.
Among the unlisted equities that you pledged to back are hundreds of companies that trade on AIM and the Aquis Growth Market, operating in many exciting industries and based right across the UK.
Having reviewed last month’s progress update issued by the ABI and after discussions with many other stakeholders, the QCA has two concerns about the Compact one year on:
- That despite the fanfare of its launch, it is not obviously taking effect quickly enough;
- And its focus is heavily skewed to private assets over public.
The figure of £793m in DC default funds that signatories have so far allocated to unlisted equities is a long way from the putative £50bn of capital that was suggested as a baseline for this scheme’s 2030 ambition.
It may well mark “good progress” as the ABI describes it, but there is no way of knowing that because comparative figures are not supplied. And if funds dash towards fields already well-served by venture capital and private equity investors, they risk failing to enjoy the best returns – or supporting the economic growth the UK so desperately needs.
While we acknowledge this is a voluntary scheme, I hope you agree that it must also be a credible one. With that in mind, we ask that you clarify:
- Your share of the £793m allocated so far to unlisted equities in this scheme;
- How that compares with your equivalent allocation 12 months earlier, in February 2023;
- And what proportion you have thus far invested in AIM and Aquis stocks.
Our members are eager to welcome new investors and those interested in increasing their exposure to growth companies. We are keen to help signatories appraise unlisted equities in their entirety, educate about the innovative areas our members operate in, their growth potential and the good governance they observe.
In addition, we will monitor closely the progress of the Mansion House Compact to 2030 and beyond.
I look forward to hearing from you.
Kind regards,
James Ashton
Chief Executive Officer
Quoted Companies Alliance
