Earlier this week, seventeen of the UK’s largest workplace pension providers signed the Mansion House Accord – a new voluntary government initiative designed to drive investment into UK companies. As someone who has invested in UK smaller companies for thirty years, I believe this is a significant and welcome step forward.
Under the terms of the Accord, signatories have committed to allocating at least 10% of their defined contribution (DC) default funds to private markets by 2030, with a minimum of 5% invested in UK assets1. The goal? To channel more long-term capital into the UK economy and support domestic growth – while also aiming to improve diversification and, ultimately, deliver stronger returns for pension savers.
Renewed spotlight on AIM
One area receiving renewed attention under this initiative is the Alternative Investment Market (AIM), which has historically been a vital source of capital for early-stage and high growth UK companies. The Chancellor’s confirmation that AIM-listed shares will be included in this Accord is a particularly encouraging signal. It represents a meaningful effort to revitalise the sector and bring more domestic capital back into UK markets.
Over the last thirty years, AIM has supported over 4,000 small and ambitious companies2. Many of these have grown to become some of the UK’s most innovative and successful businesses. At Octopus Investments, we’ve long championed AIM and UK smaller companies and are the largest investor in AIM-listed companies in the UK.3
However, in recent years, AIM has struggled to attract investment from large, long-term capital pools such as ISAs and pensions, despite AIM businesses offering comparable earnings growth to the Nasdaq.
A new direction
The Mansion House Accord aims to shift this dynamic by encouraging UK pension funds to channel more investment into high-growth domestic companies. By doing so, it seeks to support businesses through their critical scale-up phase and increase the number choosing to list and grow here in the UK.
That’s why the Chancellor’s renewed focus on AIM is so timely. With quoted UK smaller companies currently trading at valuations not seen since the 2008 financial crisis, investors now have a real opportunity to participate in the recovery of this essential growth market.
Looking ahead for the retail market
Moving forward, retail investors will have an important role to play, and their contribution could be key to reigniting momentum in AIM. For advisers, this is an ideal moment to speak to clients about the market, especially those looking to diversify their portfolios and tap into the potential of smaller, high growth businesses.
For those comfortable with the risks that come with investing in smaller companies, Octopus offers a range of products designed to provide exposure to this asset class. To learn more about these opportunities or to speak with our team, please get in touch with us.
Please be aware of some risks
- The value of any investment can fall as well as rise. Investors may not get back the full amount they invest.
- The shares of smaller companies could fall or rise in value more than other shares listed on the main market of the London Stock Exchange. They may also be harder to sell.
1Pension schemes back British growth, HM Treasury, 13 May 2025
2Celebrating 30 years of AIM, LSE, 31 December 2024
3Largest investors on AIM, LSEG, January 2025
