"We look at whether or not it's impactful," he says. "Our default impact categories are climate change, education, health, society and sustainable growth – they need to meet a global challenge. If you can solve a global challenge you've fixed a high-cost problem and are creating true value.
"Sequioa Capital is one of the most successful venture companies – they look for people; they look for market; and they look for technology. Of these three things, they look for market first. If the market is big enough, somebody will find the right product and people and to us at Future Planet, global challenges are synonymous with markets.
"For us the market and the change you're going to make is far bigger than anything else; the next two are technology and people."
Another big area of contention is the issue of charges. The private equity and VC world follows the model of 2 per cent management fee and a 20 per cent performance fee after a certain hurdle.
This latter has been allowed to fall outside the 75 bps default charge cap by Hunt in the last government, but the 2 per cent will still have an impact in the fund's charges, even if it is just a 5 per cent allocation.
Willis of XPS Pensions says: "The sort of increase is from 15bps up by 40 bps, based on 20 per cent allocation with a 2 per cent fee." He is quite relaxed about this, and adds that the whole market needs a "mindset shift" away from lower costs to a more expensive portfolio that will deliver a better return.
Flexibility issues
The other area is liquidity. DB pensions, mainly in the public sphere, are able to invest in illiquids because savers leave their savings alone and look forward to the pension promised to them. In the DC space, the burden for performance is on the saver and they have more control over which fund they are invested in, and can move funds if they wish.
However, most people do not tend to bother, either through inertia or through lack of advice (or both), staying in the default fund, and the pension industry would like to take advantage of that aversion and use it to invest in longer-term assets.
XPS would like to see changes to the rules that allow savers to move funds frequently. "The larger trusts have the scope to invest a bit in closed funds [that is, private equity funds] but not at large scale because it causes a problem with the running of their portfolio.
"Members have flexibility that they don't use and don't need, you might as well put that flexibility to good use."
The frequent issue cited around flexibility, is that savers have the ability to move regularly to a different fund if they so wish, such as an ESG or Sharia fund, but very few use that capability, and this according to the pension sector is holding illiquid investing back.
