UK launches 'Sterling 20' club for pension fund infrastructure drive

The British government launched on Monday a club of 20 of the country’s largest pension funds to try to drum up coordinated backing for local infrastructure, as major pension funds pledged 2.6 billion pounds ($3.5 billion) to UK assets.

The ‘Sterling 20’ initiative includes money managers Legal & General (LGEN.L), Aviva (AV.L) and M&G (MNG.L), as well as Britain’s biggest private pension scheme, the Universities Superannuation Scheme.

Britain has pursued a range of reforms to stimulate private investment and speed up economic growth, although the total of the various investments announced on Monday was lower than past rounds.

‘GETTING BRITAIN BUILDING AGAIN’

L&G said it would invest 2 billion pounds ($2.7 billion) in UK “impact” projects over five years, including developing 10,000 affordable homes and funding regeneration schemes, as part of coordinated announcements.

Austalia’s largest pension fund, AustralianSuper, also announced it would invest 500 million pounds in UK rental homes, which has been a booming sector in Europe.

While the government has launched various initiatives to boost private investment, some finance firms have privately questioned their effectiveness and the scarcity of so-called shovel-ready projects. Finance minister Rachel Reeves’ budget next month could also test business confidence as she considers tax rises.

“This is about getting Britain building again – bringing our savings, our investors and our regions together to deliver the homes, infrastructure and industries that will drive growth and create good jobs in every corner of the country,” Reeves said in a statement.

Sterling 20 members will work with the government and the City of London Corporation to channel pension savings into British infrastructure and high-growth firms such as in the artificial intelligence sector, the government said, without providing further details.

“(L&G’s) commitment will help unlock the investment needed in productive assets across the country – creating jobs, strengthening communities, and driving both regional and national growth,” L&G CEO Antonio Simoes said.

Pension fund Nest also said it would invest about 100 million pounds in UK assets through its money manager Schroders Capital (SDR.L), part of a wider 500-million-pound extension of its private equity investment mandate.

Eleven pension providers have signed up to a separate pact to invest 5 per cent of their funds in UK private assets. They currently only invest 0.6 per cent, the Association of British Insurers said this week.

Sterling 20 will be formally launched at the government’s Regional Investment Summit in Birmingham on Tuesday, which will be attended by a range of investors including Australia’s largest pension funds.