The joint venture aims to funnel more pension money into private markets through the Future Growth Capital investment manager.

Investment house Schroders and the Phoenix Group, a large long-term savings and retirement business, have just launched a new private markets manager, Future Growth Capital, with £1 billion ($1.3 billion) in backing.

The group will begin with £1 billion of assets from Phoenix Group, with the pension provider adding 5 per cent of its savings products to the group, bringing its contribution up to £2.5 billion over the next three years.

The firms established Future Growth Capital to promote the aims of the Mansion House Compact, a series of reforms from former conservative UK chancellor of the exchequer Jeremy Hunt aimed at boosting the UK economy, including measures such as encouraging pension funds to allocate more money to private businesses.

“The UK’s private companies are an untapped universe of investment opportunity. By stimulating investment into our private markets, our partnership will address the multiple challenges of the looming retirement crisis and boosting UK growth,” Peter Harrison, group chief executive officer at Schroders, said in a statement.

"It's encouraging to see leading pension funds promoting the Mansion House Compact and increasing their investments in private firms,” Alexander Green, co-founder and chief commercial officer, at Globacap, added. “Over the past few years, there has been a noticeable shift from public to private markets.” 

“Just recently, Calpers, one of the largest pension funds in the world, announced plans to increase its private markets allocation to 40 per cent, compared to the average pension fund allocation in private markets of just 8 per cent, and other large asset allocators are following suit. This trend equates to billions of dollars in capital inflow for private markets in the short term and trillions over the next decade,” Green continued.  

"Historically, investors like pension funds have struggled with private market transactions, which have been laborious, manual, and time-consuming, often taking weeks or months. However, over the past decade, private markets have increased funding, boosted liquidity, and embraced automation and technology, making them far more accessible and an attractive alternative to public markets,” he added.  

“Encouraging pension funds to increase allocations into private markets gives the industry a boost and presents UK pensioners with a unique opportunity to profit from this sector,” Green said. 

"This development is a significant step forward, enabling UK pension funds to provide savers with better access to high-quality private businesses while unlocking much-needed capital to finance UK scale-ups,” Ashish Patel, a managing director in Houlihan Lokey’s Capital Markets Group, added.

“Overseas pension funds (including Ontario Teachers' Pension Plan and Canada Pension Plan Investment Board) have long been active participants in supporting UK tech firms on their path to international success, yielding impressive results for their investors. We hope that UK pension fund savers will similarly benefit from the venture,” Patel said.

The move was also welcomed by UK chancellor of the exchequer Rachel Reeves who said it ensures that more of people’s pension savings are invested into the UK’s highest growth companies. “We want pension fund money to work harder for people and the economy. That’s why our pensions review will explore how we can unlock even more investment in the UK economy while boosting pension pots,” she said.