Key Takeaways
- • The BVCA has endorsed the Mansion House Accord, a voluntary agreement between the UK government and 17 pension funds targeting a default allocation of 10% to private assets by 2030, with a minimum 5% directed to UK-based investments—representing a dramatic increase from the current 0.36% allocation to unlisted equity assets.
- • UK venture capital has delivered a ten-year internal rate of return of 11% per annum through December 31, 2023, substantially outperforming the FTSE All Share index (5.3% annually) and MSCI Europe index (7.5% annually) over the same period, according to BVCA projections.
- • Non-UK pension schemes currently invest 16 times more in UK private capital funds than domestic UK pensions do, meaning British venture and growth equity performance predominantly benefits overseas retirement savers rather than UK beneficiaries.
- • BVCA chief executive Michael Moore emphasized that the accord maintains commitment to UK venture and growth equity funding in fast-growing sectors including life sciences, AI, and net zero, while expanding into infrastructure and other new areas.
- • The agreement explicitly preserves prior commitments made under the previous Mansion House Compact, signaling policy continuity on pension fund private markets exposure.
Summary
The British Private Equity and Venture Capital Association has welcomed a significant policy agreement designed to redirect UK pension capital toward private markets. The Mansion House Accord, negotiated between the UK government and 17 pension funds, establishes a voluntary target for pension schemes to allocate 10% of assets to private assets by 2030, with a mandatory minimum of 5% allocated specifically to UK-based investments. This commitment represents a structural shift in asset allocation, given that UK pension funds currently hold approximately 0.36% of their assets in unlisted equity.
The performance case for increased UK private markets exposure is substantial. According to BVCA analysis, UK venture capital funds achieved an internal rate of return of 11% per annum over the decade ending December 31, 2023—significantly outpacing traditional equity benchmarks. The FTSE All Share index returned 5.3% annually and the MSCI Europe index 7.5% over the identical period, underscoring the performance differential driving institutional interest in private markets allocation.
A critical asymmetry currently characterizes UK private capital fundraising. BVCA data indicates that non-UK pension schemes invest 16 times more capital in UK private capital funds than domestic UK pensions do, creating a structural mismatch whereby foreign retirement savers capture disproportionate returns from British venture and growth investments. This dynamic underpins the policy rationale for the Mansion House Accord, which aims to realign capital flows with domestic benefit.
BVCA chief executive Michael Moore framed the accord as economically significant, contingent on follow-through by signatory funds. Moore highlighted that the agreement sustains historical commitments to UK venture and growth equity funding while expanding into complementary areas such as infrastructure. The accord explicitly preserves prior undertakings from the earlier Mansion House Compact, ensuring continuity in pension fund exposure to early-stage venture, growth equity, and life sciences, AI, and net zero sectors.
The Accord's success will hinge on whether the 17 signatory pension funds operationalize their commitments within the decade-long implementation window. Achievement of the 10% private assets target would constitute a structural reallocation of roughly £60-80 billion in UK pension capital, assuming typical pension fund asset bases, and would materially shift the economics of UK venture fundraising by increasing domestic capital availability for growth-stage companies.
The performance case for increased UK private markets exposure is substantial. According to BVCA analysis, UK venture capital funds achieved an internal rate of return of 11% per annum over the decade ending December 31, 2023—significantly outpacing traditional equity benchmarks. The FTSE All Share index returned 5.3% annually and the MSCI Europe index 7.5% over the identical period, underscoring the performance differential driving institutional interest in private markets allocation.
A critical asymmetry currently characterizes UK private capital fundraising. BVCA data indicates that non-UK pension schemes invest 16 times more capital in UK private capital funds than domestic UK pensions do, creating a structural mismatch whereby foreign retirement savers capture disproportionate returns from British venture and growth investments. This dynamic underpins the policy rationale for the Mansion House Accord, which aims to realign capital flows with domestic benefit.
BVCA chief executive Michael Moore framed the accord as economically significant, contingent on follow-through by signatory funds. Moore highlighted that the agreement sustains historical commitments to UK venture and growth equity funding while expanding into complementary areas such as infrastructure. The accord explicitly preserves prior undertakings from the earlier Mansion House Compact, ensuring continuity in pension fund exposure to early-stage venture, growth equity, and life sciences, AI, and net zero sectors.
The Accord's success will hinge on whether the 17 signatory pension funds operationalize their commitments within the decade-long implementation window. Achievement of the 10% private assets target would constitute a structural reallocation of roughly £60-80 billion in UK pension capital, assuming typical pension fund asset bases, and would materially shift the economics of UK venture fundraising by increasing domestic capital availability for growth-stage companies.
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