E556 | EUVC Summit 2025 | Kerry Baldwin (IQ Capital) & Chris Elphick (BVCA): Europe needs to do more to unlock pension investment

0:00While Wall Street and Silicon Valley forge ahead, harnessing pension capital to fuel tech dominance, Europe faces a critical juncture. leading Europe's charge to unlock pension investments is Kerry Baldwin, co-founder and managing partner of IQ Capital and chair of the BBCA's Pensions and Private Capital Expert Panel. Science and tech is not the problem. They are everywhere. We have lots and lots of founders ready to deploy. We've got an experienced team. The whole ecosystem is set up for LPs in Europe. Our returns are as strong as the US. Alongside Chris Elphick, head of venture capital at BBCA, Together, they represent the forefront of efforts to redirect Europe's vast pension funds, expected to hit£1 trillion by 2030, into venture capital, innovation, and growth.

0:51As financial markets and geopolitical rivalries reshape the investment landscape, can Europe mobilize pension capital to take command of its own economic and technological future or risk remaining on the sidelines? Join Kerry Baldwin and Chris Elphick as they outline the path to revolutionize how we fund Europe's growing venture ecosystem. Quite the entry. Indeed. Indeed. We're going to do a double act on pensions. I'm glad people aren't exiting in droves, so that's good. So we're going to talk about, so I think Ollie from Speed Invest kind of put the picture in quite stark terms this morning, which is quite helpful, sort of, you know, the big hole and where the gap between the U.S.

1:34and Europe is. and there was sort of pensions sat there in the bottom right-hand corner as, you know, sort of how far behind we are as Europe. And it's hopefully not too esoteric journey through what the UK's been doing on this, but also how that then plays into the wider European kind of discussion on this. And I will take advantage of the chair if that's all right. Shall we? Thanks very much.

1:58So starting with the levels of investment. So I think the slide earlier said, you know, in Europe, it's sort of 10 % in the UK domestic pension. So, you know, quite often the UK VCs, where the BBCA tracks the data through what they're raising, you know, it's been as high as 20 % coming from pension funds. But it's often 100 % of that is overseas. Zero from the UK. It's hovered between zero and sort of 3%, I would say, in recent years. so and you know we the BBCA we've been sort of pushing for changes because there are regulatory reasons and other reasons why UK pensions weren't investing, couldn't invest in UK venture funds and broader private capital, this applies across private capital funds as well as a private equity and private credit and everything else so and you know chipping away at it for years, various reports from the Bank of England and other places which we fed into didn't feel like we were getting anywhere and then three sorry, two years ago, the regulatory changes were made.

2:57There was a speech from, well, then Prime Minister Boris Johnson and the Chancellor Rishi Sunak. And then later in July 2023, we had the Mansion House speech, where UK pension funds, 10 of the largest then, came together and said they would put 5 % of their assets into unlisted equities, as in private markets. So, you know, and this represented a real opportunity. And as BBCA, we were asked by Treasury, you know, how do we turbocharge the venture capital bit of that? You know, because these are very large pension funds, as you know, you saw on the screen, you said a trillion pounds forecast to be the sort of growing part of the UK pensions industry by 2030.

3:39So 5 % represented about£5 billion investment in private markets. How do we get the investment, you know, a good portion of that investment into venture because obviously you know at that size and that scale probably easier to go to private equity and elsewhere but you know we really want that bit of a venture capital turbo charge because when other countries have done this it's taken many years because you know you normally start large and then you work your way down to kind of do a venture a bit of your portfolio at the end so how do how do you make that work so you know so so we thought okay we need to sort of bring the pensions and the venture capital funds together to talk about how we can make this work because we didn't quite speak the same language.

4:15We didn't understand them. They didn't understand us. They'd been investing in, you know, low risk, you know, liquid short-term assets for the last 20 years. I hadn't looked at venture in such a long time. So, you know, how do we bridge the knowledge gap? How do we get around some of the structural challenges that were there? So, yeah, so we came up with our own compact, a venture capital investment compact to bring the VCs and the pension funds together. And we got, you know, some of the largest pension funds in the UK. So pension schemes, I should say, the Master Trust and others, which are growing by tens of billions of pounds every year, if not more.

4:50And, you know, to get them together and say, you know, venture is an asset class you need to consider. You need to understand it. You need to get to know it. And then hopefully we can unlock that investment. It wasn't going to happen overnight. So then we came up with the expert panel as the main outcome of that. And I, you know, we thought, who is the VC who's really going to bridge that? Who's going to speak pensions, bring them all together, really get to know and like and understand and invest in this asset class. So the first person, of course, we came to was Kerry. So Kerry, I want you to talk through that sort of process and what you learned and how far we've come on that journey.

5:23Thank you. And thank you, Chris. And that's a really good explanation of how long everybody's been trying to work on this agenda. So what's really important is suddenly we have got this expert panel. We've got the task, very simple. You've got to make sure that all the pension funds and insurance funds can actually invest into vehicles in order that we can all go around, find and support awesome founders. Sounds simple, but there's a whole bunch that goes on, and that isn't generally all of us. In this ecosystem, there are so many people that are vital when all of this policy is being done to us.

5:58That's the accountants. It's the legal. It's the tax. It's all those really, really important people in the ecosystem that are working underneath, tirelessly, the kind of unsung heroes. So then my job was to say, right, we need to assemble an expert panel. And this expert panel, as you quite said, had some of the largest pension houses. But we didn't just put investors on there. We wanted to have the trustees. We wanted to have the most difficult voices we possibly could in order to really work through some of these knotty issues. We had growth funds. We had venture. We had trustees. We had DC.

6:32we had DB. We then thought the most important thing is also to have the association. So we had the PLSA, the ABI, and of course the BBSCA that did so much of the driving of this. So imagine that. So imagine when you go into one of your most complex board meetings and you've got all sorts around the table. You're like, how are we actually going to all align and see this agenda together? Because we all come from different viewpoints. Well, the first meeting, that's exactly how I felt. I walked in there and I saw this wall and I thought, my goodness, how are we all going to agree find consensus in under a year with loads of stuff happening at the same time.

7:08And that first meeting, I just came out and it was just like, wow, everybody was, could we? Can we? What if? What have we tried this way? And the level of collaboration for the entire year, led and driven by these fantastic expert panel, was insane. It was just brilliant. Now, underneath that, we had 100 technical experts and they were all divided into 12 work streams. and then we basically had four final things going into the really nitty-gritty things like permitted links and lots of different things there to and through and you know it was really in the weeds in the detail but we did it and we unblocked everything that we needed to block and we got to the stage in less than a year we reported it is now possible during that year we also saw eltafs which is a vehicle which you may touch on later 27 of those released that means they've got those structures in place.

7:59So the actual both sides can now invest. So what's the problem now? We now need to understand each other. And so much of this is language. Pensions, so much is being done to them. They are under huge consolidation at the moment in the UK. They're having to really work through value for money items. They've got so many things happening to them that we must be patient. There is no magic button that we can just press and say, hey, we're ready. So I'm going to say three things that I think are really helpful for when you're engaging with pensions, having sat with them and trying to understand them.

8:32The first thing is it's complicated. Inside these big pension and insurance houses, it's not just one person who's having to decide on this. The venture teams, which they're building and scaling up, and they've got some great people in there at the moment in a lot of these teams, they have to get cleared by a risk committee, by a valuation committee, by their main board committee, by the does it work strategically in some cases. A lot of these people don't understand venture. So we have to really make sure that we're putting a very clear message, case studies, sing, but I mean, I don't need to tell you all of that.

9:04You know how to raise money from LPs. But in this case, really play on those case studies and putting the language they can understand. The next one I'd say is what I do and my team do, and I really strongly advise that you guys could consider this, is we help them. So I've run some sessions with some of the pension houses and got the people who are making decisions to come and have deep, deep dives on what's neuromorphic computing, what's space tech happening, what's happening in X, Y, and Z, in all your specialisms, just do that. Just sit around a table and don't pitch. Just get to know them through educating them in what your field you know best.

9:38Maybe get some of your founders and say, look, this is how we think about terms. Just really work with them, and they really appreciate that. And then, of course, fees. Really explain why you charge those fees. That's one of the naughty, naughty, that's one of the nitty gritty ones. Really explain about the fees. We do this because we hunt, so in IQ capital step page, we have PhDs, we engage with the professors, we do so much knowledge sessions. That is what fees are. We're building our network and our expertise that is actually being translated and transferred to our founders. I'll pass over to you because I'm just going on a bit.

10:12Thank you. Yeah, I would just, I would agree with a lot of that and I think that the sort of the the the gaps in knowledge and and as and the language on on fees in particular um uh is is is probably the most difficult one the one people always raise saying well if we can't you know they're not going to pay the fees what's the point of going of having this discussion but there are you know that we are seeing new products launched we're seeing targeted vcl tafs um you know and getting that mix right you know explaining to them why funder funds work in in some ways why venture debt is also potentially a good good good model for pension funds to kind of get access to venture.

10:46Because as Kerry said, they're building the teams. They want to do it. We need to give them the platforms and the different means of them to get involved. Because I think once they do, once they start upskilling, they're building up the teams and they start doing it, then we can hopefully start to see some investing in funds. And we have seen this year, as I said, our data showed last year, again, it was 0 % of UK pension funds invested in UK venture. It wasn't a good start while we were running our expert panel. But this year we've seen three. three LTAFs take, you know, on commercial terms, alongside other LP stakes in venture funds.

11:17So we're starting to see progress this year. So again, like Kerry was saying, I think we just need to keep on it and keep pushing them on this because there is the will there to do it. There is absolutely the will. How long have we got, by the way? All right, Kerry, you can go. There is absolutely the will. They really understand it. And a lot of them, in order to make their models work, actually need to look at co-invest to actually blend those fees out. So really making sure that when you're looking at your co-invest, you're really taking the one that's right to that fund. So it's at the right stage.

11:49It works for their strategy. It's something that they could probably add value within their firms. And that's really, really important to look at. And then take them through early enough, because remember, some of them are not going to be able to deploy money as quickly as some of the people can in this room. So get them engaged in that company, thinking, hey, I think this one could work for you. The board looks like this. the end state is this. I think that you've got great connections. And a lot of these big pension funds do have really good connections to the US and other geographies. And just work with them with that co-investment possibility there.

12:23But I think for me, just coming right back, it's really, really important to be just patient. So there's a lot of people saying, where is the button? A little bit vocal on social media. They are doing their best. you know they want to be doing this and it's just very important they get to know us and what would be really helpful for some of you that the what we produced at the bbca is we produced um report right at the beginning on the state and inside that it's got a lot of the technical stuff you know what is to and through if someone asked you that you know at least you can read that one pager of a guidelines and just flick through some of those reports on the really technical aspects so at least you're up to speed and speaking their language so i suppose turning to you um on europe would be the next case.

13:05Yeah, so, and how this is playing out. So, actually, I mean, the UK didn't really lead the way on this. It was actually France through their Tibby scheme. So that was a very successful scheme in France led by Professor Tibby. And it essentially required Macron sort of strong-arming all the insurance funds in France to get behind the scheme. And it's invested something like 10 billion across, I mean, not just venture, but across the French market, which has been, you know, and has been done that very successfully. so imagine how building off the back of that I've spoken to other associations, people in other governments around what we're doing how this can play out in Europe, there's the WIN initiative in Germany I've spoken to Danish Finnish, many other associations and representatives of government talking around, okay, we really want to move the needle on pensions, how have you done it?

13:52How do we do it? How do we make the case for it? So I think there is we're all having this conversation and we all need to keep keep pushing it so i think that yeah that there is there is there is skepticism um but you know as a consonant we are still way too reliant on government funding um and uh time okay so sorry so okay if i could just have 30 seconds just just to finish that up so i completely got the timing wrong there um uh which was uh which was yeah you know institutions we are so reliant on overseas institutions and government we need our institutions to step up pension funds if we're gonna you know because when the last couple of years it did happen when the US pension funds, which did invest heavy over here, went back to their domestic market, there was nothing to replace it.

14:34So we need to change that and it needs to happen soon. Carrie, I don't know if you remember. The last word for me is thank you so much to EUVC for bringing us all together and that collaborative spirit that I've just felt all throughout these sessions. My last word is this, having run my first fund in 1997, a 50 million deep tech fund, and done God knows how many funds since then, you have cycles and there are cycles where you can pick up deals and you can behave and you can put terms down that are really, really harming founders and harming their teams and harming the actual very, very early ecosystem investors, those very early angels.

15:07Just play nicely. I've had to do this speech in 2001, 2009, and I'm just giving a little nod now. Just play nicely. Before you go, I just want to give a massive shout out to the partners who made the EUVC Summit and Awards possible. So please do not tune out. We're partnered with these firms because they're great people with offerings that we know from our friends in the ecosystem are truly world class. First up, I want to give a big thanks to HSBC Innovation Banking. They helped us in SAP the awards in the very beginning. And truly, they are the leading bank for anyone in European venture. There's a reason why everyone knows them.

15:44Google Cloud, they were our venue hosted the summit. What a team, what a big effort they put on to help us. We're hugely grateful. make sure to reach out to Arabella or Oksana at the Google Cloud team to hear how they can help you as well as your portfolio. Massive credits goes to them. Ace Alternatives, we have so many friends in the Berlin ecosystem partner with these guys. Just the best fund ops team around. And as with any good restaurant, where the locals are is also where you get the best service. And now they're expanding across Europe, so they're definitely someone to talk to. Hainspoon, they're longtime partners of ours in both our own legal work They're great supporters of us here at EUVC, and I definitely think that they are one of the go-to legal teams to have in your corner.

16:30CW Communications, our dear friends who helped us secure CNBC, Bloomberg, Financial Times, and many more for this summer. It's a joy working with Dan and Kathy and the team. The Fundcraft, Digital Native, Full Suite, Lux Headquarters, and a great partner as you grow your firm out of Luxembourg. Definitely a fund admin to consider in your stack. I can only say that the team are incredible to work with. I'm very thankful that I've gotten to know them. I think they're one of the up and coming fund admins that you want to be thinking about. Portfolio IQ by Synaptic. You may know them for the Discover tool, which is branded under Synaptic, but Portfolio IQ is absolutely a product you should know because there's no one that understands intelligence better than this team.

17:15And finally, Goodwin. They are a truly world-class legal partner you can trust. They're hands-on, business-oriented, an expert in everything and anything transatlantic. So those were our partners for the summit and awards. I know this might have been a bit long and boring, but really, if you have these guys on your side, I don't think your firm could be in any better hands. And also they're helping us do what we're doing every day for you.