Government-sponsored investment companies could support UK economic growth and deliver on national priorities, according to a new paper, ‘Making people better off’, from the Association of Investment Companies (AIC).
With the new National Wealth Fund as a cornerstone investor, these partnership funds could promote a range of objectives such as advancing the net zero transition, boosting regional economic growth, and supporting new technology and innovation. Since their shares would be listed on the London Stock Exchange, the public would be able to invest alongside the government and other investors, for example pension schemes.
The government’s ambition is to significantly increase investment in UK infrastructure and drive economic growth. With the government’s fiscal constraints, private capital is required and the pensions industry has committed to investing more in unquoted UK assets.
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “Investment companies in partnership with the National Wealth Fund could offer a new way for investors, from pension funds to individual ISA holders, to fund infrastructure projects, new technologies or the transition to net zero. All investors would be able to invest in these innovative projects which aim to drive the UK economy forward and create long-term wealth.
“Through the National Wealth Fund, the government could act as a cornerstone investor in each new investment company, alongside private and institutional investors, creating a unique combination of public and private capital. The Fund could then sell down its holdings as the company became established, should it wish to do so, enabling the capital to be recycled into new projects.
“Investment companies provide a tried-and-tested way of overcoming the practical challenges of investing in infrastructure and new technologies. Their permanent capital structure removes the need to redeem investors’ units when they want to sell and therefore facilitates stable, long-term decision-making. As well as offering permanent capital, investment companies have independent governance and offer liquidity through the stock market – a combination of features that could be attractive to pension funds, other institutions and the general public, as well as to the government.”
In addition to the partnership funds proposal, the AIC makes a number of other policy proposals in the paper:
- Stop taxing investors who buy British by abolishing stamp duty, at least on the shares of investment companies where the current rules penalise investors with double taxation
- Create an effective regulatory environment, including reform of cost disclosures
- Support the provision of scale-up capital by considering options to enhance and extend the role of venture capital trusts (VCTs)
More detail on these proposals can be found in the AIC’s policy paper, ‘Making people better off’.
