Phoenix Group has bought a minority stake in London venture capital firm Hambro Perks as the UK’s largest savings and retirement business seeks to increase access to fast-growing private companies for its customers.
The FTSE 100 company has bought a 5 per cent stake in the holding company of Hambro Perks, with the possibility to grow that stake to 10 per cent over time, executives of both groups told the Financial Times. Terms of the deal were not disclosed.
“We’ve been thinking about ways to democratise access to private assets for defined contribution portfolios,” said James Mitchell, head of strategic partnerships at Phoenix. “A lot of companies are staying private for longer so you miss out if you don’t have access to private markets.”
The investment by Phoenix comes as the UK continues to shift away from defined benefit pension schemes, where employers are on the hook to pay employees’ pensions at a fixed level, to DC schemes, where worker contributions are invested and their income in retirement depends on the performance of those investments.
Top executives have called for a shift in risk culture in the UK pensions industry and are advocating a greater allocation to private assets such as unlisted equities as a way to achieve potentially higher returns for long-term savers. The UK government is also trying to channel more DC pensions into potentially higher-growth, private companies.
In July, Phoenix was one of nine of the UK’s largest pension providers that agreed to commit 5 per cent of their so-called default funds for DC pension savers to unlisted equities by 2030. It formed part of Chancellor Jeremy Hunt’s Mansion House Speech, which unveiled a package of reforms to boost pensions and increase investment in the UK.
Phoenix has 12mn customers and £259bn in assets under administration. It has already been an anchor investor in previous Hambro Perks funds, but this is the first deal of this kind the group has done.
Its new investment will make it among Hambro Perks’s largest shareholders, and comes just a few months after the venture capital firm’s co-founder and leader Dominic Perks abruptly resigned in April.
Perks, who set up the firm a decade ago, also stepped down as a director of its listed investment vehicle, Hambro Perks Acquisition Company.
The firm has not given any explanation why its leader and public face departed.
Andrew Wyke, chief executive at Hambro Perks, declined to comment on Perks’s exit but said Phoenix’s investment marked a “vote of confidence in the current business model and chief executive”.
Venture capital funding has faced a dramatic slowdown, as rising interest rates have dragged on technology valuations. VC investors have pulled back from many deals, except in sectors such as artificial intelligence.
Wyke acknowledged the challenging fundraising environment. He said that while there has been “a material slowdown in the volume and quality of deals coming to the market”, there have been signs of improvement in the third quarter.
Hambro Perks owns stakes in more than 100 companies, including US biotech Gelesis, geolocation start-up What3words, fintech group PrimaryBid and investment platform Moneybox.
Alongside its flagship venture capital fund, which backs technology companies in early stages of development, Hambro Perks also has offerings such as a fund for buying secondary shares and a vehicle focused on emerging environmental technologies.