The UK aims to pass legislation that will require local government pension schemes to consolidate assets into "megafunds" that can invest at scale in the UK's biggest growth opportunities, including private equity, Chancellor of the Exchequer Rachel Reeves said during her first Mansion House speech Nov. 14.

Aegon UK PLC and NatWest Cushon, which was formed by NatWest Group PLC's acquisition of Cushon Money Ltd. last year, agreed to invest in the initial fund, called the British Growth Partnership, Reeves said.

The British Business Bank will launch the British Growth Partnership, subject to regulatory approval.

The legislation is part of the UK's pension reform. Reeves said unlike Australian and Canadian pension schemes, which are able to invest more in assets such as infrastructure and private equity, the UK's "pensions landscape remains highly fragmented."

The largest global transactions with pension involvement in the first and second quarters of 2024 have involved the Canada Pension Plan Investment Board and H.E.S.T. Australia Ltd.

– Read about trends in private equity investments in electric vehicle chargers. – See the list of global pensions and endowments with the largest private equity allocation. – Explore more private equity coverage.

"By consolidating and focusing disparate pension pots, investors would gain access to high-caliber growth opportunities that are often out of reach for smaller individual funds, but which could be effectively realized under a single, unified framework," Ashish Patel, a managing director in Houlihan Lokey's Capital Markets Group, said in a press statement.

"High-tech industries of the future — life sciences, advanced manufacturing, digital technologies, and others — are precisely the kinds of fertile, innovative fields that would be best placed to drive growth and deliver attractive returns for UK pension investors," Patel said.

UK pensions exposure to private equity

The UK has 113 public pension schemes, according to Preqin. Assets under management range from $300 million to $71.49 billion. Median AUM is $4.38 billion.

Of the 20 pensions with the largest AUM, at least 17 are exposed to private equity.

The largest pension scheme by AUM is Northern LGPS, with $71.49 billion, according to Preqin. Northern is an asset pool for Greater Manchester Pension Fund, Merseyside Pension Fund and West Yorkshire Pension Fund.

Its recent private equity investment commitments include Genstar Capital Partners XI LP, Eighth Cinven Fund SCSp, ECI 12 LP, BV Investment Partners Fund XI and AEA Investors Fund VIII LP, data from S&P Global Market Intelligence shows.

Northern LGPS' top fund manager is HgCapital LLP, with capital commitments across four funds by the British manager. These funds are Hg Saturn 2 and Hg Genesis 9, buyout funds currently harvesting investments, with vintage year 2020; and Hg Saturn 3 LP and Hg Genesis 10 LP, buyout funds already deploying capital, with vintage year 2022.