Greater coordination between insurance regulation and pension regulation, as well as greater incentives, could prove helpful in the push to invest in UK productive finance, industry experts at the PLSA Investment Conference 2024 have suggested.

During a panel session on diverse strategies for growth, PLSA policy board member and panel chair, Laura Myers, asked about what the UK can learn from other countries in regards to recent efforts to drive up investment in UK growth.

Responding, Schroders group chief investment officer, Johanna Kyrklund, said: “I think the key thing would be to see a slightly sort of less conservative definition of matching assets and insurance information, and more coordination between insurance regulation and pension fund regulation that that would be helpful.

"That's something we've seen in other markets that is more supportive of a long-term mindset, whatever it is you're choosing to buy.

“Obviously, we also have other pension systems where the local pension funds were made to stay invested in the local market - we see that a lot actually.

"The problem is that horse has bolted here, it's very difficult allowing pension funds to run unconstrained, so I don't think that is necessarily something we can emulate here."

However, she suggested that “maybe at best here we could have tax incentives to encourage that kind of investment”, as seen in Australia, where there are benefits for investing in domestic markets, also pointing out that credits used to be available around 25 years ago.

“We’ve kind of moved in a different direction now and it’s hard to reverse time,” she added, noting that whilst the industry knew this was a big change when it was announced, it “just wasn’t the kind of think people want to read about on the front of The Times”.

Adding to this, HSBC global asset management chief executive officer, Stuart White, suggested that "we also need more partnership between government, our industry and the regulator to see how we can build UK PLC again around some of the technologies that we know are going to be needed for the themes around a transition to a low carbon economy and biodiversity loss".

He stated: "We have some phenomenal institutions in the UK in terms of education, and we have a lot of venture capital and startups... I think there's an opportunity here for us to be the future leader in some of these technologies and hopefully some of the major listed companies of the future coming out of the UK and supporting emerging markets where we have those challenges.

"So for me that's important to see that value chain evolve, and clearly if there are tax incentives that will be super helpful".

He also suggested that the asset owner community can help with this, by creating "incubation pots" for start ups in key industries, stating that this is "one area I would love to explore more and evolve".

The panel were also asked by TPR chair, Sarah Smart, about the appropriate time scales for institutional asset owners when assessing asset manager performance, and whether they had any plans to align bonus structures and performance fee structures in line with that timescale.

"When it comes to assessing performance I think you do have to assess us over three and five years, because although our investments may be longer term, the reality is that the boards we're presenting to, they have to show that their that their strategy is delivering," Kyrklund responded.

"So as much as I'd like to have 10 years to prove our worth, I don't think that's a luxury we can afford, we have to accept we're going to get judged over three or five years."

"Our bonus structures are aligned with that timeline," Kyrklund added, clarifying however, that this is not because of the bonus structures, but because "if we're not delivering over that period, it's very difficult for [clients] to stay the course.

Smart pushed back, however, suggesting that for some institutional investors, five years doesn't sound particularly long-term, particularly for productive finance, venture capital and climate.

"You're right," Kyrklund clarified, suggesting that "when you're doing longer term investments, then the nature of the investment itself is also much longer, and you don't have the same challenge, as you're locked in, so you're less likely to deviate from the course and from the strategy, and that in itself fosters a more long-term perspective.

"Typically, the incentive structures are also more aligned with the long-term investment in those funds."

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