Children may be being given SpaceX shares over in the States, but UK pension reforms means Brits can access superstar companies through their savings, writes Ian Cornelius
News arrived last week that Elon Musk will give every American child a share in SpaceX. It comes days after Anthropic, the frontier AI firm, announced plans for five per cent of its shares to be placed in a ‘public benefit’ fund. OpenAI, its competitor, reportedly floated a similar proposal in July.
Whatever you might think about the necessity or underlying motivations of these plans, it’s worth pausing on why they’re so eye-catching in today’s market.
Consider this: When Microsoft listed in 1986, it was worth less than a billion dollars. Anyone with a modest shareholding came along for the extraordinary ride that followed. You could say it grew ‘in public’.
By contrast, early growth in today’s superstar companies is the reserve of billionaires, sovereign wealth funds, various endowments and the sort of global-scale pension funds that historically the UK has largely lacked. Today’s Microsofts can stay private for a lot longer. The value that these companies reach over a handful of years has already been captured, to the benefit of wealthy early investors. This means that, for the most part, ordinary British savers are left out.
In this era of dominant private markets, UK pension funds must find a way for British workers and savers to access the widest possible range of investments. That might be the chance of catching the next superstar, or diversifying market risk through ‘boring’ but stable assets like housing and infrastructure. This is how the richest ensure their wealth increases no matter what: they combine a strategy of ‘limited downside/unlimited upside’ with stable income regardless of what goes on in public markets. The same approach should be available to everyone, but it gets harder as so much value is kept behind closed doors.
How pension reforms are helping Brits
This week, the ABI published the latest figures on progress towards the pension industry’s Mansion House commitments. Signatories committed 10 per cent of their portfolios to be invested in private markets, half of which will be invested in the UK. The figures from the ABI show it is possible: more than £11bn has been invested so far in UK private markets, giving pension fund members access to what is otherwise off-limits.
For example, Nest, where I work, is an investor in the British startup Wayve, which is bringing its self-driving cars to London, one of the world’s first cities to host the new tech.
We’re also in on companies like Citation, a tech firm in the North West providing compliance services to 110,000 customers, and 9fin, a British fintech startup valued at $1.3bn. In total, we have committed £3bn to unlisted equities – around five per cent of our portfolio – one in every five pounds of which is invested in the UK.
All three are examples of the UK’s world-class tech ecosystem, and they sit alongside other great firms, homes and infrastructure in Britain and beyond whose returns our members might never access without the reach that their pension fund provides.
I’m especially proud of the fact that our scale has enabled us to do this on our terms: we do not pay performance fees – all of the upside goes to our members. Investing on their own terms is another thing that the wealthy get access to, but that we now offer to savers by merit of our scale, positioning and thoughtful approach.
But what matters to pension funds like us is the new opportunity and unique access it gives to our members. They won’t have to wait for a billionaire to give away shares in Wayve and 9fin and Citation, or in thousands of others like them – they’re already bought in.
Ian Cornelius is CEO of Nest Pensions