AIC Proposes Partnership Funds to Enhance UK Investment

The Association of Investment Companies (AIC) has urged the government to implement ‘partnership funds’ as a strategy to foster growth in the UK economy.

In a recent policy paper, the AIC recommended that government-sponsored investment companies could play a significant role in boosting investment in UK infrastructure and promoting economic development.

This proposal includes the creation of a National Wealth Fund that would act as a cornerstone investor for these funds, enabling investments across various sectors, including the transition to net zero and technological innovation.

Richard Stone, chief executive of the AIC, emphasized that with the current fiscal constraints faced by the government, there is a need for private capital. He noted that the pensions industry has made commitments to increasing investments in unquoted UK assets.

Stone stated, “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.” He added that the fund could then reduce its stake as the company matures, allowing the capital to be reinvested in new projects.

He also pointed out that investment companies offer a successful method of addressing practical challenges associated with investing in infrastructure and emerging technologies. Their permanent capital structure eliminates the need for investors to redeem shares, thus facilitating stable, long-term decision-making.

Furthermore, Stone highlighted that investment companies provide independent governance and liquidity through the stock market, making them appealing to pension funds, institutions, and the general public.

In addition to the partnership funds proposal, the AIC has called for the removal of stamp duty on investment companies. The association argues that this tax penalizes investors who are purchasing British assets, with a tax of 0.5% applicable on the purchase value of shares in UK companies.

The AIC also anticipates that the Treasury will reassess the tax system to better support enterprise, including exploring options to further enhance the role of Venture Capital Trusts (VCTs). Recently, the government extended the VCT and Enterprise Investment Scheme until 2035.

Moreover, the AIC has reiterated its request for reforms in cost disclosure. A bill aimed at addressing misleading disclosures associated with investment trusts recently passed its first reading in the House of Lords.

This release of the policy paper coincides with the upcoming Budget announcement by the new Labour government scheduled for 30 October.