As the government launches a National Wealth Fund, providing investment opportunities without dictating asset allocation can build confidence among those invested in private markets, Naureen Zahid, director of investor relations at early-stage deeptech VC OpenOcean has said.
Yesterday, the new Labour government pledged £7.3bn in funding for a National Wealth Fund to attract private investment into UK infrastructure.
The Chancellor, Rachel Reeves, and the Business Secretary, Jonathan Reynolds, also instructed officials to begin work to align two key institutions under a new National Wealth Fund to invest in the “new industries of the future”.
The NWF will also work with mayors to bring together a finance and investment offer intended to support the needs of local areas and to drive growth.
Zahid, who has worked for VC firms in Europe welcomed the announcement but stressed that it should not become a rebranding exercise.
She added: “It's reassuring to see the government resolve any confusion between the UK Infrastructure Bank (UKIB) and National Wealth Fund (NWF).
“However, clear differentiation and streamlined operations are essential to avoid bureaucratic redundancies that could hamper the fund’s effectiveness. Investors will be watching closely to ensure that the NWF genuinely catalyses growth rather than just shifting existing structures around.
"While working with local mayors to tailor finance and investment strategies for specific needs is a step in the right direction, the government must set out clear plans for regional investment ecosystems across the country. By providing various investment opportunities without dictating asset allocation and sharing information on different performance metrics, it can create incentives to invest, rather than mandates.
“This means building confidence, especially among those invested within private markets who have been apprehensive in investing in the country. That is a key prerequisite before the government sees real action, translating as reduced and stable inflation figures close to its target, guided by strong macroeconomic policy.”
Ahead of the announcement about the wealth fund, Nalaka De Silva, head of private market solutions at Abrdn said that the establishment of a national wealth fund in the UK would significantly enhance the country's ability to finance large-scales projects.
He added: "Although resource constraints require careful targeting, a UK wealth fund could be pivotal in advancing key areas like renewable energy, real estate, infrastructure, and high-tech growth sectors. Effective management, potentially through public-private partnerships, is crucial to balance social outcomes with financial returns.
"Positioned alongside traditional financial pillars such as the stock market, pension funds, insurance sectors, and individual savings, a UK wealth fund could accelerate domestic growth initiatives and maximize capital deployment opportunities for both investors and the nation."
