Investment Compact for Venture Capital & Growth Equity

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The BVCA, with the support of the Government, has launched the Investment Compact for Venture Capital & Growth Equity (the "Compact"), a commitment by UK venture capital and growth equity fund managers to develop a long-term and constructive working relationship with UK pension investors. This will offer an exciting investment opportunity for pension savers and could help enable greater investment into the UK Science and Technology sectors.

The UK venture capital and growth equity industry will work with pension providers over the next 18 months (from October 2023 to Spring 2025) to progress the delivery of the proposals set out in the Compact. This will seek to deliver on the Government’s objectives to increase UK pension scheme investment into venture, growth and other private capital funds as part of a diversified portfolio, which was set out in the Chancellor of the Exchequer’s Mansion House proposals.

The Compact builds on Mansion House Compact of July 2023 which saw nine of the UK’s largest Defined Contribution pension providers commit to the objective of allocating at least 5% of their default funds to unlisted assets by 2030.

The BVCA has been involved over many years in the policy considerations and key initiatives, such as the Productive Finance Working Group, that have been aiming to remove the regulatory, cultural and operational barriers to this investment. The Compact is the next stage of this work and will help to drive the agenda forward.

With over 100 signatories, the Compact represents some of the UK’s leading venture capital and growth equity fund managers, with over £100bn of Assets Under Management. The signatories recognise that the Government’s aim to unlock over £50bn of capital by 2030 is a unique opportunity for pension savers and could enable them to benefit from higher potential net returns whilst increasing UK-based funding for the UK Science and Technology sector. According to the City of London Corporation, only 0.5% of UK DC pension assets are invested in unlisted UK equities such as venture capital and growth equity.

The Expert Panel

Signatories, acting in the best interest of investors, commit to:

  • Attracting UK pension funds as limited partners into the funds they manage or advise.
  • Partner with pension investors to consider how they can produce effective investment structures to suit their needs to allow allocations to funds in the interest of savers.
  • Share best practice/rules of engagement for working in private markets with DC schemes, particularly trustees and their consultants/advisers.
     

In our role as the industry’s advocate, the BVCA also commits to a range of measures to support the outcome of the Compact, including:

  1. To work with the wider industry to establish a Pensions & Private Capital Expert Panel to develop effective investment structures and share market best practice and produce guides/reports.
  2. To develop events to connect pensions investors with private capital fund managers and highlight potential investment opportunities.
  3. To work with the pensions industry to create training programmes and best practice documents to develop greater understanding of the private capital industry.
  4. To report progress from BVCA members in attracting UK pensions capital into the funds they manage or advise (to the extent possible and subject to confidentiality).

“Many overseas investors have jumped at the chance to invest in – and benefit from – the performance of innovative UK firms. UK savers must have access to the same opportunity. We want to seize this opportunity for British pension savers to benefit from returns garnered from VC innovation in the UK, while helping businesses to grow, succeed and create jobs.”

Michael Moore

Michael Moore

Chief Executive, BVCA

“The Compact demonstrates that the VC industry is committed to partnering with pension schemes to help them address the barriers they face when allocating to this asset class, in order to allow savers to benefit from the higher potential net returns that can arise from investment in unlisted equity such as private capital funds as part of a diversified portfolio.”

Andrew Williamson

Andrew Williamson

Managing Partner, Cambridge Innovation Capital

 

The Compact builds on the UK Government’s broader proposals regarding UK pension schemes, such as the Long-term Investment For Technology and Science (LIFTS) initiative which aims to unlock UK institutional and private investment from UK DC pension funds into innovative UK science and technology companies, catalysing private investment and stimulating the UK VC ecosystem, through the commitment of up to £250m into a successful proposal.

BVCA members who want to add their names to the Compact can do so by contacting the policy team here and more details on our work regarding DC pension schemes’ access to private capital funds can be found here. 

Learn more about the Expert Panel

Helpful links

BVCA Technical Publications Jargon Buster Private Equity Reporting Group BVCA Policy Submissions Model Documents For Early Stage Investments BVCA Technical Policy Conference BVCA Committees, Forums and Advisory Groups The BVCA & ESG Private Capital Update

For further information please contact the BVCA Policy Team

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