• Future Growth Capital (FGC) will be the first private market investment manager to be established in the UK to promote the objectives of the Mansion House Compact.
• FGC will aim to deploy a significant allocation of up to £2.5bn over three years from Phoenix Group, in line with its Mansion House Compact ambition, with an initial £1bn commitment.
• In total, FGC will aim to deploy £10-20bn of investor funds into private markets over the next decade.
• FGC aims to deliver improved outcomes for long-term pension savers in the UK by enabling efficient access to private markets investments and their potential for delivering higher long-term investment returns.
• FGC will invest in the UK as well as globally, identifying the British businesses of the future and providing long-term financing to help them grow.

Phoenix Group, the UK’s largest long-term savings and retirement business with 12 million customers, and Schroders, the global investment manager with a £74bn private market capability¹, today announce their agreement to form a new strategic partnership, Future Growth Capital.

Future Growth Capital (FGC) will, subject to all regulatory approvals, support the objectives of the UK’s Mansion House Compact, unlocking investment opportunities in private markets for millions of new pension savers to benefit from the diversification and investment return opportunities that unlisted assets can offer.

FGC aims to deploy an initial £1bn and £10-20bn over the next 10 years into UK and global private markets. Phoenix Group intends to invest 5% of its relevant savings products² on behalf of its policyholders, in line with its Mansion House Compact commitment. This will provide scale at inception, with ongoing fundraising led by both Schroders and Phoenix Group.

The new investment manager will design and manage UK and Global multi-private asset solutions for UK insurance and pension clients to open access to a broader range of innovative companies and investment opportunities for millions of UK pension clients. Initially it will leverage Schroders’ pioneering Long-Term Asset Fund (LTAF) investment platform, providing investment advice to the fourth and fifth LTAFs planned for launch by Schroders’ dedicated private markets business, Schroders Capital, in the UK.

A key focus of FGC will be investing on behalf of pension savers to grow the UK’s companies of the future. FGC will provide long-term financing for innovative, growing businesses, helping to create jobs and boost the UK economy. As a major investor in the UK’s private markets, it will help to develop the UK private market ecosystem and to promote the UK as an attractive private market investment destination.

Chancellor of Exchequer Rachel Reeves said:

“I welcome today’s multi-billion-pound announcement from Schroders and Phoenix Group, which will ensure that more of people’s pension savings are invested into the UK’s highest growing 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.”

Peter Harrison, Group Chief Executive Officer, Schroders, said:

“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. By connecting long-term savers with our country’s most inventive companies, Future Growth Capital will help more people to fund a secure and comfortable retirement, whilst supporting businesses to grow and thrive right here in the UK. In doing so, we’ll be making the UK an even more attractive place to live, work, retire and invest.”

Andy Briggs, Group Chief Executive Officer, Phoenix Group, said:

“For too long, pension savers in the UK have received lower returns than their counterparts in the P7 such as Australia and Canada, partly because the UK allocates much less capital to private market assets than other developed countries. By forming FGC with Schroders, it will help us to deliver our goal of giving UK long-term savers a way to invest in a more diversified portfolio with the potential for higher returns, from a broader range of assets. This facility will also play a significant role in the future design of our flagship defaults. FGC will be a long-term, patient capital investment manager, constructed to ensure that customer protection remains at its core by taking a blended approach to asset allocation.”

The full benefits of FGC:

A partner for UK pension savers 

Longer lifetimes and low savings rates mean that more than half of UK Defined Contribution (DC) savers are currently not on track to meet the PLSA’s minimum retirement living standard³. Private markets offer pension and other long-term savers much-needed diversification and the potential for higher investment returns to help boost their retirement incomes. To benefit UK pension savers and access the returns from private markets, FGC will launch UK and Global LTAFs, offering diversified exposure to a broad range of UK and global private market opportunities. FGC’s solutions will aim to deliver better outcomes to pension savers, allowing them to invest efficiently and with confidence.

A partner for UK business

FGC will also align with the aims of the Mansion House Compact, of which Phoenix is a signatory and which Schroders endorses, by connecting the long-term investment needs of pension savers with the long-term financing needs of the UK’s most innovative companies.

There are approximately 35,900 medium sized private companies in the UK⁴, compared to just 1,900 companies listed on the London Stock Exchange.⁵ The UK is a centre for technological and industrial innovation, but there is a shortage of home-grown financing to support new, emerging businesses. FGC will invest in the UK’s businesses of the future, providing the long-term financing they need to grow and remain in the UK. FGC will support the goals of the Capital Markets Industry Taskforce (CMIT), of which both Schroders and Phoenix are committed supporters.

Championing the UK

FGC will also promote the UK as an attractive private market investment destination internationally and spotlight the many world-leading private companies that we have. This builds upon the recently announced partnership between Schroders, Phoenix Group and the British Business Bank to support the government’s Long- term Investment for Technology and Science initiative, which aims to stimulate venture and growth investment in the UK’s life science and technology companies.⁶

Notes

1. As at December 2023
2. Phoenix has initially identified c.£50bn of Defined Contribution products where illiquid assets have the potential to deliver better long-term outcomes for policyholders. Therefore, based on the current value of these products, Phoenix could invest c.£2.5bn over the next three to five years.
3. Phoenix Insights reports that 55% of defined contribution savers are either not on track or not expecting to meet the Pensions and Lifetime Savings Associations (PLSA) minimum retirement living standard.
4. Business population estimates for the UK and regions 2022: statistical release (HTML) – GOV.UK (www.gov.uk). Medium sized companies here defined as those with 50 to 249 employees.
5. Number of companies on London Stock Exchange 2023 | Statista
6. Schroders Capital to launch a UK venture and growth LTAF with £300 million awarded by the British Business Bank and Phoenix Group