Britain's leading asset managers are in advanced talks to create a multi-billion pound investment fund to back UK start-ups and stem the flow of technology firms snubbing London for New York, a key official working on the proposal told Reuters.
Nicholas Lyons, a veteran banker and current lord mayor of London, said the planned 'Future Growth Fund' would aim to draw up to 50 billion pounds ($63.11 billion) from British pension pots to invest in fast-growing technology and biotech firms.
Lyons said he was taking part in advanced discussions with several FTSE 100 asset managers and insurers on the blueprint for the fund and to get "buy-in" for the proposals, adding they could be finalised by the end of this year.
He cited the Canada Pension Plan Investment Board and AustraliaSuper funds - both of which have a sizeable presence in London - as examples of funds to emulate, arguing they were "eating our lunch".
The talks coincide with efforts by British lawmakers and regulators to accelerate financial sector reforms designed to attract more multinational companies to invest in Britain and join its stock market, after UK-based chip designer ARM chose New York for its IPO.
The fund would act as a giant UK-focused venture capital fund, Lyons said, specialising in backing unlisted start-ups before they hit public markets.
"There's a cliff edge at the moment between being unlisted and listed," Lyons told Reuters. "At the moment these companies have to follow the money. If the money is in North America... they're going to North America."
PENSION FUND WORRIES
The planned fund could be supported by a government mandate for all UK defined contribution pension funds to invest a proportion of their funds in the vehicle, Lyons said, but added he did not see this as a dealbreaker.
Pension experts cautioned retirement schemes are unlikely to welcome any attempt to compel them to invest in riskier fledgling companies.
"[This] runs counter to a long UK tradition of allowing investment as seen appropriate by its owners or their agents," said Con Keating, head of research at Brighton Rock Group, an insurance company for pension schemes.
Lyons, who previously worked at JPMorgan and Lehman Brothers, has made consolidating pension fund investment in Britain a key focus of his role in the largely ceremonial one-year post as lord mayor of London, which he began in November.
He took a sabbatical as chairman of insurer Phoenix Group to step into the role.
TAX BREAKS
Britain should learn lessons from countries with a more vibrant retail investing culture such as Canada, the United States and Sweden, Lyons said, noting Sweden gave capital gains tax breaks to investors to improve backing for domestic stocks.
"If you want people to buy British, if you want to create more liquidity in the UK, that's a pretty easy way to do it," he said.
Lyons also backed industry calls for higher pay for top executives in Britain, to better compete with the United States and senior roles in sectors such as private equity.
Julia Hoggett, chief executive of the London Stock Exchange, said last week that boardroom pay levels at British companies were making it difficult to attract talent, drawing criticism from fair pay campaigners.
"We need to move the dial. We need to talk about the importance of the creation of wealth, as a driver for the creation of jobs," Lyons said.
($1 = 0.7923 pounds)
