The LTAF will start with almost £150m from Aviva in a mix of assets and cash and will have no fixed lifespan. It will invest with a UK bias in Europe and North America across fintech and insurtech, healthtech, science and technology, and climate and sustainability.

Aviva has targeted an overall return of 15% per year on a five-year rolling basis. It will make its venture investments through third-party funds and other evergreen vehicles.

Dame Amanda Blanc, group CEO at Aviva, said: “Aviva is investing more and more in the UK, to support growth and back Britain’s flourishing early-stage companies. This new fund will provide vital finance to some of the UK’s most promising, high-growth businesses, aiming to deliver great returns for our customers.”

This will be the fourth LTAF launched by Aviva, following the Multi-Sector Private Debt LTAF in November.

See also: PA Live A World Of Higher Inflation 2025

Mark Versey, chief executive officer at Aviva Investors, said: “This fund marks another step in our ambition to unlock the benefits of Private Markets for more investors, and to be the go-to provider for the UK’s DC and Wealth markets. We are incredibly pleased to expand our LTAF range further, making it easier for investors to allocate more to these asset classes and to enjoy the returns and diversification they can offer.

“Targeting venture returns, we expect our new fund to help the companies of tomorrow get ready for the future, driving innovation and growth through investments that also have the potential to have a positive societal and environmental impact.”

While private credit stayed in the green across senior, mezzanine and distressed debt funds, private equity and real asset faced some areas of negative returns. Within private equity, venture capital dropped 0.4% in the quarter, while real estate funds within the real asset category fell 0.3%. This is the ninth quarter in a row of negative returns for real estate, which decreased by 0.8% in Q1 of this year. In 2023 as a whole, real estate dropped 6.4%.

In total, global private equity funds returned 0.8% in the second quarter, compared to 1.2% in the first quarter, while private real asset funds returned 1.1% after 0.7% in Q1.

See also: Home REIT sells 200 properties in preparation for wind down

Keith Crouch, executive director of MSCI research, said: “Looking ahead, the private-capital landscape remains uncertain as asset managers and asset owners await better exit opportunities in many asset classes. While a significant portion of current valuations are in relatively young investments, there are warning signs in some asset classes — particularly venture capital — that the share of value held in the oldest investments continues to increase. Performance has remained (generally) positive and capital calls remain low, however, so asset owners are in a waiting game.”

The holding periods across private market investments have also risen since their 2022 lows, with venture capital at a weighted average of 5.4 years, its highest on record. There has also been notable separation in venture capital between mean and weighted averages, with high valuation investments being held for longer, according to Crouch.

See also: Private markets: Wealth managers face high barriers to entry

In terms of unrealised holdings, fund sectors including venture capital, buyout, private real estate, and private infrastructure all have a strong uptick of valuation growth since 2020. This has reached over $400bn for private real estate and private infrastructure, and near $2.5trn for buyout funds. Yet, while venture capital had been nearing a valuation of $1.3trn, it has now fallen under the $1trn mark.

“First, this is another reminder of the significant growth of the private-capital industry over the last 14 years, with most asset classes quadrupling in size. Second, we can see that a significant portion of the current valuation is in holdings that are less than four years old, from which we would expect few exits,” Crouch said.

“Finally, however, we can note that the value in older holdings has grown on both an absolute and a relative basis: There is more than USD 200 billion in venture-capital holdings that are into the eighth investment year.”

The fund – which first sought approval from the FCA in March – will be seeded with a cornerstone investment of £300m from savings and retirement business Phoenix Group and the UK government’s British Business Bank. Each will make a starting investment of £150m.

This newly-approved LTAF is intended to offer defined contribution (DC) and other institutional investors exposure to early-stage companies in the UK, particularly in the technology and life science industries.

Most of these companies are inaccessible to investors due to their lack of liquidity – Schroders’ head of UK DC Tim Horne said the new fund will open up the diversification benefits of private markets.

See also: Schroders CEO Peter Harrison to retire next year

“Supporting the UK Government’s Mansion House reforms, this fund will help unlock the potential for DC schemes to invest into fast-growing, early-stage companies,” he added. “These investors have so far been underweight private markets, venture capital and UK businesses in particular.”

And with the UK being the largest venture capital market in Europe, Schroders CEO Peter Harrison said gaining access to this challenging asset class is essential for driving long-term returns and boosting UK growth.

“The UK is one of the most innovative countries in the world, punching above its weight in many sectors, including science and technology innovation. This is why it’s critical we increase investment into these sectors to develop the skills and culture that will benefit savers today and in the future,” he said.

“A UK venture and growth LTAF will act as a catalyst to unlock institutional investment, particularly from UK defined contribution pension schemes, and increase the supply of capital to UK technology and science start-ups. This initiative will ultimately strengthen UK economic growth and reinforce the UK’s position as the natural home for fast-growing companies.”

See also: Schroders confirms Richard Oldfield as new CEO

This will be Schroders third LTAF, having launched its first, Schroders Capital Climate+, in April last year. It is dedicated to giving UK pension fund investors exposure to illiquid assets that are supporting the net zero transition.

Its second LTAF, Schroders Greencoat Global Renewables+, was launched in February this year and invests in renewable energy and transition infrastructure.

The research estimated private market assets under management to reach between $60trn to $65trn by 2032, with a compound annual growth rate (CAGR) of 9% to 10%. Private equity and venture capital are believed to remain the two largest categories, but Bain expects an expansion of private alternative credit at 10% to 12% CAGR and infrastructure at a CAGR of 13% to 15%.

See also: Carne: Private markets due for expansion, but access and regulation barriers remain

Markus Habbel, global head of Bain’s Wealth & Asset Management practice, said: “Wealth and asset managers are now favouring private markets because the business models that have dominated asset management for years have nearly run their course. Private assets constitute a much larger market than public assets and offer potentially higher yields, diversification, and in cases such as real estate—a hedge against inflation.”

The momentum of private markets is being picked up by retail investors, with 16% of 2022’s retail AUM made of private markets. Bain expects this to increase to 22% by 2032. Yet as the industry grows, Bain estimated fee revenue doubling to 2032, reaching $2trn.

See also: CSC: 34% of special private vehicle executives leave planning to just before regulation

“Individuals are drawn to the alternative asset market by the prospect of diversification and higher returns and are therefore willing to tolerate lower liquidity,” said Habbel. “In response to this demand, leading companies have launched innovative offerings such as intermittent liquidity products for retail investors.”

Habbel said in order for asset managers to capitalise on the growth, they will need to create a niche product and be able to offer large-scale production. He recommended a redesign of front-to-back office operations to allow for the differences in private and public market systems, sales representatives with thorough knowledge of the market, and M&A integration skills.

It is time to change the funding system. Last year, women only received 2% of venture capital funding in Europe and the United States – the lowest amount since 2016.

This issue is not new – female founders have always struggled to access their equal share of investment – but it is about time we stopped looking at the ‘why’ and started driving action to ensure this history changes.

This should begin with looking at the structures in place and the framework that allows this to happen. We know that women back women – female venture capitalists (VCs) invest in twice as many female-founded start-ups as their male counterparts – so if VC teams have less capital to deploy, this naturally leads to reduced ability to deploy that capital into as many female-powered businesses.

A recent report found that all-male run VC funds raised around ten times more capital than all-female run funds and almost five times more capital than mixed-gender-owned funds between 2017 and 2023. The result of this is not inconsequential.

That is not to say that no male-led VCs invest in businesses founded by women – some women are very good at asking men for money. It is, however, part of a wider systemic problem.

If we want to unlock billions of pounds for the UK economy and drive better return for both VCs and for LPs, we need to address the problem at its source.

A strategic imperative

According to research from Harvard Kennedy School, the fundamental structure of the VC industry perpetuates inequalities. VCs which have historically been run by men, with low-staff turnover, rely on networks to make business decisions.

Today, the industry remains heavily male dominated – only 12% of fund managers in the UK are female.

Women are naturally less inclined to network and ask outright for money or help than men. This coupled with the fact that men are more likely to back other men due to internal biases and shared social and professional networks leads to the systemic inequalities that we observe in today’s VC industry.  

Indeed, this is reflected in many female founders’ lived experiences. Amy Nauiokas, Founder, Group CEO and General Partner at Anthemis, said: “Despite women’s proven ability to generate outsized returns and faster exits, women entrepreneurs face systemic underfunding that hamstrings the entire financial ecosystem.

“The staggering market potential of female founders is being gravely undermined by deep-rooted biases. Channelling capital into funds led by women investors is crucial for injecting vital diverse perspectives into the financial system.”

As Amy points out, not only are women not getting funding into their businesses, but funds are missing out on potential returns.

Research from BCG and Mass Challenge found that women-led companies generated 35% higher return than men-led companies. The evidence in favour of funding early-stage female businesses never runs out.

Another report by the European Women in VC network showed that the financial performance of European VC funds increases with higher representation of women in senior management teams. VC funds managed by mixed teams also show a higher annual internal rate of return and lower levels of volatility on their portfolios.

The industry needs to radically rethink how investment opportunities are evaluated and how their teams are constructed.

Driving change at the top

Some UK-based female-run VCs are already taking action. Alma Ventures, Angel Academe, Pink Salt Ventures and dozens more are working tirelessly to empower women in the industry and close the funding gap, and Barclays Principal Investments led the first and anchor LP allocation in the Female Innovators Lab Fund.

It is a $50m vehicle, managed by Anthemis, dedicated to investing in fintech companies with at least one female founder. It is the largest early stage fintech fund led by a completely female team, focused solely on female-led teams, and provides access to mentorship and business connections, as well as the wider Barclays ecosystem.

But leaving them to solely lead the charge will inevitably have its limits – they cannot do it alone. Female VCs themselves need more capital and to do that we need to go straight to the top of the funding chain.

This means having conversations with institutional investors, like pension funds, to get their buy-in and ensure they think strategically about making allocation decisions that support female-led VCs.

In the same way the Mansion House reforms will help drive allocation for unlisted equities, there is no reason we cannot encourage more to female VC funds and therefore more female powered businesses.

Helping drive this change is why the Invest in Women Taskforce was founded. It is industry led, and government backed as that is the only way we can enable a new age of public and private sector collaboration that amplifies the public offering into female VC funds. In turn, this will also stimulate more private investment to create the deeper, structural change we desperately need.

By expanding female-led VC communities, highlighting successful VC funding for female businesses and confronting stereotypes, we can push more funding into female-powered companies.

In the end, this is not just about equal access to capital. It makes financial sense for women entrepreneurs, VCs, institutional investors, and the economy as a whole.