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Sir Patrick Vallance: Local authorities should pool pension funds to boost startup investment

(PA)
(PA)

The UK’s former chief scientific adviser has called on local authorities to pool their pension funds in order to more effectively deploy investment into higher-risk, fast-growth tech startups.

Sir Patrick Vallance, known for his appearances on televised government briefings during the coronavirus pandemic, said larger funds would help fund managers better understand and manage risks when making venture investment.

“I think we have a very fragmented system and if you look at other countries that have done more pooling you get better critical mass and the right scale to put more into the much higher risk space,” Vallance said.

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“There’s an inherent conservatism in those companies themselves…which means that everyone is going to be jumpy about [high risk investment] all the time. So there’s something about getting an investment structure which allows people to feel comfortable with the degree of risk.”

It comes after the London Pensions Fund Authority (LPFA) unveiled a consultation to explore the consolidation of London funds with the LPFA. Local government minister Simon Hoare has told local authorities to investigate the pace of pooling and explore the prospects of potential fund mergers, according to a report by Room151.

The UK has more than 80 separate local authority pension funds, but Sir Patrick suggested emulating a model such as Canada’s, in which small pension funds have consolidated into much larger ones with deeper pools of capital and greater expertise.

He was speaking at a London Tech Week fringe event held by LocalGlobe, a venture capital business run by Saul Klein, who co-founded streaming service LoveFilm before selling it to Amazon in 2011.

Sir Patrick sits on the board of ARIA, an independent body setup last year which develops research programmes to create new technologies.

Vallance said he was also excited by top universities building stronger ties with industry and getting savvier at venture investment into student startups.

“Historically there had been a problem of universities wanting 100% of nothing [but now they say] we’re not going to try and grab a slice of the cake to eat, we’re quite happy to wait and be patient and give this a chance to flourish.”