Coal pension schemes back private equity

The trustees of two multi-billion pound UK pension funds have decided to invest a further £560m (E903m) in the asset class.

Yesterday's decision brings the total investment in private equity by the Mineworkers' Pension Scheme and British Coal Staff Superannuation Scheme to £1.4bn (E2.3bn), increasing the asset allocation to 5%, up from 3%.

The schemes' increased commitment to private equity will please government ministers and the venture capital industry, who have been co-operating in a well-publicised campaign to pressure the nation's pension funds and insurers to invest more of their £750bn pool of savings in unquoted investments.

Only 0.5% of British pension funds’ assets are in venture capital, compared with 5% in America, and recent figures released by the British Venture Capital Association show the allocation was still falling last year despite the excellent returns from private equity investments recorded in the same period.

Both the Mineworkers' and British Coal schemes use Cinven, a large European buyout firm, to manage their existing private equity assets, but the chief executive of both schemes David Morgan, told Financial News the additional allocation would be spread among a number of different managers.

“We will be seeking returns on an opportunistic basis as managers bring their ideas to the market place. We would be inclined to explore earlier phase and ex-UK opportunities,” Mr Morgan explained following the trustees' decision, which he said was based on forecasts that returns on conventional assets were set to fall.