The Association of Investment Companies (AIC) has called on the government to adopt ‘partnership funds’ as part of its mission to boost UK growth.
According to a policy paper entitled Making people better off, the AIC suggested that government-sponsored investment companies could aid the government in its efforts to significantly increase investment in UK infrastructure and drive economic growth.
The proposal would see the newly-created National Wealth Fund as a cornerstone investor in the funds, which would then invest in the UK economy in a variety of areas, including the net zero transition and supporting tech and innovation.
“With the government’s fiscal constraints, private capital is required and the pensions industry has committed to investing more in unquoted UK assets,” the association said.
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Richard Stone, chief executive of the AIC, said: “Through the National Wealth Fund, the government could act as a cornerstone investor in each new investment company, alongside private and institutional investors, creating a unique combination of public and private capital. The fund could then sell down its holdings as the company became established, should it wish to do so, enabling the capital to be recycled into new projects.
“Investment companies provide a tried-and-tested way of overcoming the practical challenges of investing in infrastructure and new technologies. Their permanent capital structure removes the need to redeem investors’ units when they want to sell and therefore facilitates stable, long-term decision-making.
“As well as offering permanent capital, investment companies have independent governance and offer liquidity through the stockmarket – a combination of features that could be attractive to pension funds, other institutions and the general public, as well as to the government.”
Stamp duty
Among other proposals, the AIC also called for the removal of stamp duty on investment companies, arguing that investors are being penalised by buying British. Currently, investors are taxed 0.5% of the purchase value each time they buy shares in a UK company traded on the stock market.
The AIC also said it expects the Treasury to review how the tax system can best support enterprise, which should include considering options to further support the role of Venture Capital Trusts.
The government recently extended the VCT and Enterprise Investment Scheme until 2035.
Meanwhile, the association has reaffirmed its calls for cost disclosure reform. The Listed Investment Companies Bill, which seeks to address the issue of misleading disclosure on investment trusts, passed its first reading in the House of Lords last week (5 September).
The release of the policy paper comes ahead of the new Labour government’s first Budget on 30 October.
