NAPF Annual Survey shows fewer pension funds are investing in PE

The survey reveals that approximately one per cent fewer funds are investing in private equity but that the amount invested has increased to £2.8bn from £2.525bn last year.

Responses to the National Association of Pension Funds (NAPF) Annual Survey 2000 indicate that pension funds feel themselves to be burdened with a mass of red tape – much of it unnecessary and counter productive in terms of achieving the Government’s objective of encouraging further private pension provision. More than 500 respondents operating some 850 schemes were surveyed.

Referring to venture capital, the report says that only 23 per cent of schemes surveyed invest in private equity funds compared to about 24 per cent last year. The Dresdner Kleinwort Benson Research report, featured on PEO today also draws attention to the fact that UK investors continue to lack appetite for private equity as an asset class. Over three-quarters of funds do not invest in private equity. The DrKB report commented though on the UK government's wish to see investment in private equity increase and references the forthcoming Myners Review of Institutional Investment and its likely recommendation to remove some of the obstacles that have existed to date. Last month, the review called for the removal of the Minimum Funding Requirement which has been a factor in restricting pension funds from investing in private equity funds.

The NAPF results show however that total investment in venture capital and development capital funds rose to £2.8bn (E4.41bn) in 2000 from £2.525bn in 1999. This was helped by the £28bn British Coal schemes which in May agreed increase private equity investment by £560m to £1.4bn. The NAPF survey says that the Myners Review into Institutional Investment and the review of Minimum Funding Requirement are key concerns to pension fund managers and are said causing a virtual freeze in changes to benefit structures.

The DrKB report quotes Prime Minister Tony Blair's speech at the BVCA’s Entrepreneurial Summit last year, when he said: “British pension funds invest around 1 per cent of their money in venture capital. In the US, it is nearer 5 per cent. I can’t make pension funds invest more in venture capital but I urge them to look at the issue, to examine whether they and other institutional investors are being too cautious when it comes to venture capital.”

However, despite the difficulties faced by schemes, the 2000 survey, based on replies from more than 500 respondents operating some 850 schemes says that there is a continuing willingness by employers to improve and broaden the range of existing benefits.