Phoenix Group and Schroders to launch new private markets investment manager with £1bn initial commitment; up to £2.5bn over three years
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 capability[1], 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 products[2] 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 standard[3]. 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 superior returns 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 UK[4], 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]
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Schroders plc
Schroders is a global investment management firm with £750.6 billion (€866.2 billion; $956.9 billion) assets under management, as at 31 December 2023. Schroders continues to deliver strong financial results in ever challenging market conditions, with a market capitalisation of circa £7 billion and over 6,400 employees across 38 locations. Established in 1804, the founding family remains a core shareholder, holding approximately 44% of Schroders’ shares.
Schroders has benefited from a diverse business model by geography, asset class and client type. It offers innovative products and solutions across four core businesses; Public Markets, Solutions, Wealth Management and our private markets business Schroders Capital. Clients include insurance companies, pension schemes, sovereign wealth funds, high net worth individuals and foundations. Schroders also manages assets for end clients as part of its relationships with distributors, financial advisers and online platforms.
Schroders aims to provide excellent investment performance to clients through active management. It also channels capital into sustainable and durable businesses to accelerate positive change in the world. Schroders’ business philosophy is based on the belief that if we deliver for clients, we will deliver for our shareholders and other stakeholders.
Issued by Schroder Investment Management Limited. Registration No 1893220 England. Authorised and regulated by the Financial Conduct Authority. For regular updates by e-mail please register online at www.schroders.com for our alerting service.
Schroders Capital
Schroders Capital provides investors with access to a broad range of private market investment opportunities, portfolio building blocks and customised private market strategies. Its team focuses on delivering best-in-class, risk-adjusted returns and executing investments through a combination of direct investment capabilities and broader solutions in all private market asset classes, through comingled funds and customised private market mandates.
The team aims to achieve sustainable returns through a rigorous approach and in alignment with a culture characterised by performance, collaboration and integrity.
With $93.7 billion (£73.5 billion; €84.8 billion)* assets under management, Schroders Capital offers a diversified range of investment strategies, including real estate, private equity, secondaries, venture capital, infrastructure, securitised products and asset-based finance, private debt, insurance-linked securities and BlueOrchard (Impact Specialists).
*Assets under management as at 31 December 2023 (including non-fee earning dry powder and in-house cross holdings)
About Phoenix Group
Phoenix Group is the UK’s largest long-term savings and retirement business with £280 billion of assets under administration.
As life expectancy continues to increase and the pension landscape continues to shift, we offer our 12 million customers a broad range of pensions, savings and life insurance products across our family of brands which include Standard Life, SunLife, Phoenix Life and ReAssure. Our vision is to help even more people on their journey to and through retirement, providing the right support at the right time.
We are a growing and sustainable business united by a common purpose – helping people secure a life of possibilities. This drives everything we do and means taking responsible and sustainable investment decisions, and using our presence and voice to drive forward change for the better, for our customers, our colleagues, and our wider community.
A FTSE 100 company, we also feature in the FTSE100 ESG Select Index series and we are playing an active role in helping to invest in a sustainable future. As part of this, we have committed to our operations being net zero carbon by 2025 and for our investment portfolios we have set an interim target of a 50% reduction in the carbon emission intensity of c£250bn by 2030, as we progress towards our portfolios being net zero carbon by 2050 or sooner.
We have been recognised as a leading employer for many years. We are accredited as a Living Wage Employer, Living Pension Employer and as a Carer Positive Exemplary Employer for offering the best support to colleagues who are carers.
[1] As at 31 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