UK Pension Funds Still Failing British Tech Scale-Ups, Says OSE Chief Ed Bussey

The manager of Oxford University’s flagship spin-out fund has delivered a scathing verdict on the City’s top nurses, accusing UK pension funds of being “not up to par” when it comes to writing checks for the country’s most promising tech businesses, despite successive governments promising to fix the problem.

Ed Bussey, chief executive of Oxford Science Enterprises (OSE), said that reform efforts such as the Mansion House agreement, where seventeen of Britain’s largest workplace providers voluntarily pledged to invest more of their members in private and high-growth companies, were not moving fast enough to keep up with the pace at which businesses with roots in Oxford were growing.

“Everyone has identified the problem, but the movement towards a solution is far from the speed at which we and others are building companies,” Bussey told Business Matters. “We have companies that have technology that should be thinking about $100 billion in terms of opportunity, and that’s reflected in the international capital — especially American capital — that these companies are attracting.”

Britain’s problem with America’s fingerprints

The numbers tell their own story. Bussey said the bulk of the £300 million in foreign capital raised by OSE portfolio companies last year came from US investors rather than domestic backers. Across the wider market, the UK now receives 80 per cent of its capital from overseas, according to figures from UK Private Capital, the trade body for Britain’s private equity sector.

“There is nothing wrong with the US currency per se,” Bussey said. But part of the UK’s money, especially the UK pension, needs to be dialed in ten times. [within pension funds] this space, this opportunity, this potential return.”

His frustration was sharpened by a recent conversation with a Gulf aide. “One of my investors in the Gulf said: ‘You are sitting on our Gulf oil equivalent.’ But UK pension funds aren’t big on this opportunity. The whole world is scratching their heads when you look at this.”

It’s a complaint that will sound familiar to anyone who has followed the growing chorus of calls for Britain’s pension giants to return home before the upside is sent ashore. For all the political enthusiasm about turning the UK into “the next Silicon Valley”, the capital that ultimately reaps the rewards of British science still tends to be raised in Boston, San Francisco or Abu Dhabi – not Edinburgh or the Square Mile.

The promise of Mansion House, and its critics

Both previous Conservative administrations and Sir Keir Starmer’s Labor government made opening up the home pension a priority policy. The 2023 Mansion House compact set a goal of 5 percent of default fund assets in the private market. Last summer, that ambition doubled when seventeen workplace pension providers signed the Mansion House deal, which was officially announced by the Treasury, agreeing to allocate at least ten percent of their fixed income to private properties by 2030, at least half of those in the UK, releasing an estimated £25 billion into the local economy.

Lord Vallance of Balham, the science minister, admitted the pace was a source of impatience but insisted momentum was building. “Is it as fast as everyone wants? No. But it’s starting and I believe that will change quickly,” he said.

Critics, however, argue that without strong incentives – or, on the contrary, mandates, defined contribution savers in Britain will continue to underwrite foreign infrastructure and the retirement of foreign pensioners rather than the domestic economy of innovation. As Business Matters publisher Richard Alvin once argued, the UK’s real problem is one of belief as much as money: the structural inability to support our own.

From the lab bench to a multi-billion dollar business

Bussey’s scope came alongside the OSE’s latest annual report, which painted a much clearer picture of operational performance. Total asset value rose 17 per cent year-on-year to £1.26 billion, boosted by two historic exits.

In September, IonQ’s $1.08 billion acquisition of quantum computing pioneer Oxford Ionics gave OSE its first unicorn exit. Before the year ended, the fund also completed the sale of cancer drug discovery business Dark Blue Therapeutics to US biotech giant Amgen in a deal worth up to $840 million. Between them, the two transactions returned more than £283 million to OSE.

Bussey said that some of the realizations that exist now have a strong perspective. “Within the next two to four years we will reach the stage of general realization. We have proven that we can take science out of the workshop and create a multi-billion pound company. The exciting thing now is that we have an idea of ​​what is happening.”

In Britain’s ecosystem of SMEs, and universities, investors and innovators trying to turn world-class research into world-class companies, the question is whether the country’s pensioners will have a meaningful share of that, or, again, the wealth created in Britain’s labs will end up funding retirees on the other side of the Atlantic.