The UK investment management industry has outlined a series of recommendations to boost private market investment in the UK.
The recommendations, published by the Investment Association (IA), the body that represents the UK investment management industry, has identified a number of areas where more can be done to increase private market investment.
First, is 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.
Second, is maintaining a pipeline of investable projects.
The IA highlights that 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.
Third, is 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.
Fourth, is 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 £25.6bn, as set out in the Spending Review, is a welcome step in this direction, said the IA.
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 aim to ensure that barriers to investment are understood, and tailored policy solutions are formulated on a sector-by-sector basis.
Private capital already contributes nearly £200bn 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.
“Private markets are set to play a transformative role in unlocking UK growth and delivering greater prosperity,” said Galina Dimitrova, director for capital markets at the IA. “The recommendations set out in this paper provide a strong foundation for private markets investments to flow into scalable opportunities across the UK.”
And Dimitrova added: “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.”
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