The UK investment management industry has today outlined a series of recommendations to boost private market investment in the UK to drive forward economic growth and global competitiveness.
Private capital already contributes nearly £200 billion annually to the UK economy and momentum is building, with the UK government’s recent initiatives aimed at unlocking pension fund capital acting as an important step toward realising this potential.
The recommendations, published by the Investment Association (IA), identify several areas where more can be done to increase private market investment – this includes (see Notes for full list):
- Strengthening delivery of institutional reforms by publishing progress against the 10% private markets allocation target for DC schemes, with firms required to explain their rationale if they are below the target. As this data becomes available, it could be further used to benchmark progress, identify barriers, and assess where further action or policy support may be needed.
- Maintaining a pipeline of investable projects. While the modern Industrial Strategy and the 10 Year Infrastructure Strategy clearly identified the eight high-growth sectors and outlined a national infrastructure and construction pipeline, this clarity must continue, and Government should maintain and regularly update a transparent, long-term project pipeline.
- Increasing retail participation by allowing the inclusion of Long-Term Asset Funds (LTAFs) within Stocks and Shares ISAs to broaden access to long-term investment opportunities. These products should be accompanied by clear, consistent and transparent disclosures on risk, liquidity, and fees to enable informed participation.
- Greater education on private markets to raise awareness of the role, address risk aversion, and return characteristics of private markets. This should include resources tailored to DC scheme trustees, LGPS pools, retail platforms, and financial advisers.
- Incentivising early-stage development by expanding co-investment programmes like those run by the British Business Bank, which help attract private capital intro strategic sectors and regions by reducing risk, such as through junior public stakes or first-loss guarantees. The Government’s plan to increase the Bank’s capacity to £25.6 billion, as set out in the Spending Review, is a welcome step in this direction.
Alongside the recommendations, the IA has also launched its Modern Industry Investment Programme to foster secure and sustainable growth. To aid the growth of high-potential sectors identified in the UK Government’s Industrial Strategy, this initiative will facilitate collaboration between high-growth potential industries seeking capital and the UK investment community. By bridging the gap between policymakers, investors, and industry leaders, it will ensure that barriers to investment are understood, and tailored policy solutions are formulated on a sector-by-sector basis.
Galina Dimitrova, Director for Capital Markets at the IA said:
“Private markets are set to play a transformative role in unlocking UK growth and delivering greater prosperity. The recommendations set out in this paper provide a strong foundation for private markets investments to flow into scalable opportunities across the UK. Realising this potential will require continued momentum and our industry will work in partnership with Government and regulators to address barriers and help shape a dynamic and accessible private markets landscape. Our Secure and Sustainable Growth Partnerships initiative will play an important role in achieving this by creating tailored sector-specific policy solutions.”
