"There's no [UK] capital going into this area of the market – there's capital in the early and seed stage, and there's capital all the way through a growth story, but at a certain point the capital switches from UK-originated capital to global-originated capital from institutions, the UK-originated capital is not flowing into the companies as they grow.
"There's a growth sector that isn't short of capital. A company in its very early stages that is good can find high-quality GPs [private equity funds that take stakes in private companies] to back them that are typically UK-based investors, but what we see is the capital to provide the next scale up is coming from institutional investors that are from overseas.”
As Horne speaks to master trusts and company schemes, he expects the climate and energy fund need to be £500mn upwards to work, but he adds there is a huge demand for capital from these assets – the venture fund he believes could get to £1bn eventually.
"We're about where we want to be. [In Climate+ today there is £130mn invested in the fund], and Renewables is £60mn. We're confident we're on track, and that will be for both funds, for climate and renewables.”
One of the areas that is raising concern is access to private markets for DC pension funds that do not use LTAFs.
The fact that these funds need to provide daily liquidity and valuations, and an open window to the retail investor via a platform, means that investing in private market assets outside of LTAFs are not a 'permitted link' for these funds.
Horne says: "LTAF is a permitted link fund which means the insurer doesn't need to do further due diligence on the fund. You can't just stop the permitted links rules because they cover an array of [other retail investments] that should have these protections in place. It's a world where you have a whole layer of fiduciary responsibilities through trustees who need that protection.
"As an industry there has been lots of lobbying of how they could potentially be evolved, but the FCA's view is, 'We've given you LTAFs and that's designed to give you the assets that you want'."
Horne has spent 13 years at Schroders, always working in DC, and having worked in the DC side of the Schroders business since 2017. His job is to persuade pension funds to believe in the concept.
For Schroders, the business is trying to get ahead of the game, in the hope that it will transform British pensions and help the UK economy.
Melanie Tringham is features editor at FT Adviser
