Investment entities that eschew British capital holdings should face public criticism, proposes Phoenix Group CEO.
Hangin' Out the Shame: Sir Nicholas Lyons Urges Naming and Shaming of Pension Funds Avoiding UK Assets
UK pension funds should face public scrutiny for skipping out on domestic investments, according to Sir Nicholas Lyons, mastermind behind the Mansion House Compact. Speaking candidly to The Telegraph, Lyons called for bold action to strengthen London's capital markets.
"Boldness is the name of the game," Lyons emphasized in his exclusive interview. "I think we're not bold enough in our approach. I don't believe we can mess around anymore. We need substantial moves and groundbreaking ideas."
In a nutshell, Lyons, the chairman of Phoenix Group, argued that transparency is the solution to sparking more UK investment by pension funds.
"Transparency is crucial to kick-starting more investment in the UK," he said. "The biggest risk lies in not being sufficiently brave in our actions."
Lyons expressed a preference for open disclosure requirements rather than specific targets for the proportion of funds allocated to local assets.
"We're not lapdogs for the government, but I am convinced that if your clients are placed into illiquid asset classes, you don't want to expose them to political risks, regulatory risks, currency risks. Thus, you'll develop a natural bias toward domestic assets," Lyons explained. "That's why I've personally opted for an organic, logical approach to investment instead of explicitly mandating a specific percentage designated for the UK market."
Recent Actions Regarding Pension Funds
Lyons' statements signify the latest move in the ongoing saga, following earlier warnings against mandating UK equity investments for pension funds. During an event at the Guildhall, he voiced his opinion, stating, "I believe the private sector ought to have the autonomy to make the best decisions regarding domestic buyer interest in listed equity capital."
The sentiments expressed by Lyons were echoed by British Business Bank CEO Louis Taylor, who commented, "It's more effective to incentivize rather than mandate, fostering an open and flexible UK economy."
Lyons also suggested that the government should utilize the threat of mandation to encourage pension fund decision-makers to keep a diligent focus.
Some private funds standing to profit from the rule changes have welcomed the proposition. James Codling, managing partner at VC firm Volution, announced, "Anything that encourages greater investment in the venture ecosystem, I support."
However, others have sharply criticized the proposals. Simon French, chief economist at Panmure Liberum, commented, "To describe this pension reform as anything but perverse would be a struggle."
The Mansion House Accord, an agreement among UK workplace pension providers aiming to boost unlisted equity investments, is set to receive an update this month under Treasury guidance.
Investment Shifts Among Pension Funds
Pension funds in the UK have been reshaping their investment approaches related to domestic assets. Defined benefit schemes have traditionally held a robust UK exposure, primarily through safer, lower-yielding assets like bonds. Allocation to UK equities has dwindled significantly, dropping from 32% in 2006 to only 2% today[2]. Defined contribution schemes have also reduced their UK investments, falling from 55% in 2012 to just 22% currently[2].
However, recent initiatives aim to increase local asset investments. The Mansion House Accord, a voluntary initiative, encourages UK workplace pension providers to invest 10% of their default funds into private markets, with 5% allocated to UK assets whenever possible[3]. This move is seen favorably for pension contributors, as it provides access to new sources of long-term returns without government-mandated specific investments[3].
Role of Sir Nicholas Lyons
More information is needed to fully comprehend the exact role of Sir Nicholas Lyons in pension fund discussions concerning investments in UK assets. Investigate additional sources or context to acquire deeper insights into his involvement.
- Sir Nicholas Lyons' call for transparency in the investments of pension funds could potentially lead to a boost in London's capital markets, as he believes it could encourage more UK investment among the funds.
- In the realm of wealth management and personal finance, Sir Nicholas Lyons' preferences for open disclosure requirements suggest a shift towards a more organic, logical approach in pension fund investing, diverging from explicitly mandating a specific percentage for the UK market.
- In the broader context of the economy and finance, Sir Nicholas Lyons' stance advocates for bold action and incentives rather than mandates to foster a strong domestic business environment, thereby attracting investments in UK markets.
