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Unlock UK pension funds to speed recovery and boost savers. https://www.ft.com/content/d30f5302-21c4-4fb5-a988-dbcfd34aef14?shareType=nongift via @financialtimes
This is highly unlikely to happen in my view and quite utopian.
This is highly unlikely to happen in my view and quite utopian.
Pension funds have been repeatedly called to provide "patient capital" (see Clark's "pension fund capitalism") but this has always failed to materialise. This is often blamed in asset managers' short-termism or tight regulation. But the problem is actually more structural.
A recent example is the 'pension infrastrcture platform', set up by the previous government as a way to get pension to invest in UK infrastructure. It raised 1bn and mostly invested in already existing infrastructure https://www.ft.com/content/b47e481e-2307-11e5-bd83-71cb60e8f08c
The reality is that pension funds in the current context are totally unsuited for long-term financing. They live in a financial world where liquidity is vital, and only some assets (eg Gilts) provide it. This is certainly compounded by mark-to-market accounting and regulation.
Moreover pension funds lack an institutional stabiliser (what @craigpberry calls a "temporal anchor" in his forthcoming book), that could allow a long-term investment horizon, as employers became unwilling to do so for DB funds and DC funds are only "backed" by invidividuals.
As @jenchurchill79 osays, we repeatedly call for pension funds to counter short-termism and fund long-term "good things", but this is an unrealistic request. Instead the opposite happened, as pension funds adapted to the reality of modern market-based finance. E.g. March 2020
TLDR I don't think pension funds can save modern capitalism.
With @anninak82 and @jenchurchill79 we have finished a working paper, roughly based around this argument. We will hopefully it circulate soon (and hopefully it will be published somwhere in the near future!).
With @anninak82 and @jenchurchill79 we have finished a working paper, roughly based around this argument. We will hopefully it circulate soon (and hopefully it will be published somwhere in the near future!).
@Powell_J_R thanks for the pointing me to the FT article.
