A declining stock market and restrictive pension system rules have made the UK a less attractive place for new businesses to find the funding they need. The FT looks at what is being done to improve the City's competitiveness as an international capital marketThe London stock market has been suffering from an outflow of investment.That means that the returns that those companies make will go to overseas investors.
These are not the sorts of investments that get a lot of asset managers out of bed in the morning excited about putting money to work. The new economy, tech, artificial intelligence, all of that stuff, is just not here. In an ordinary market, what you'd normally have is companies replacing them, and so that ordinary churn is a normal part of a vibrant capital market. I think the fact that IPO activity both in London and globally has been so subdued for the last couple of years obviously places a greater emphasis and focus on those companies that have made those decisions.
I don't think it will take very much for people to see the attractiveness of London rekindled, and certainly we're making sure there are going to be no regulatory barriers to that.I think the listing rules in the UK haven't changed substantially in quite a quite a long time. So I this is an opportunity to put London back into a global context.
My name is Matthew Scullion. I'm the CEO and co-founder of Matillion. We're about 450 people. We were founded in 2011 and we sell our software all over the world. We wanted to be at the intersection of two mega trends, cloud and data. Around 2014 we developed some technology for our own use actually, and once we got it finished it worked so well we could feel that sucking sound of need from the market. And consequently we needed to grow our business quickly.
The UK has a thriving start-up scene, particularly in sectors like biosciences and fintech. There are some great spin-outs coming from Oxford and Cambridge universities. In general, your narrative on how you're talking about that to me sounds absolutely bang on. Of that money we've raised, only $mn came from the UK. All the rest came from Silicon Valley. Once you've taken foreign money it's likely that all the money after that will also come from that geography.
I'd like to see a British Alphabet. I'd like to see a British Microsoft. It might not be for a decade, but I'd like to see a homegrown company with, you know, a trillion dollar cap. you need to talk to the proto-public companies, which is what I represent. So yeah, sometimes I feel like the leather jacket versus the pinstripe suits. But if we want to crack this code we don't just need to look at what we do in the City. We need to look at what we do in the supply chain of private company business building. There's no point having the world's best public markets if there's no companies to list on it. And that's the part of CMIT I get passionate about.
The issue with that is when you talk to the people who manage pension funds for a living, they don't want to be told what to buy by Jeremy Hunt or Rachel Reeves or anybody else. They want to do what is right. They want to get the best returns they can. We're at a bit of a kind of, you know, slightly at loggerheads here.
The major challenge the UK faces is the two biggest pots of capital with insurance companies and with defined benefit pension funds do not take risk. And regulation responded to that by reducing the amount of risk that pension funds could take with their assets, pushing them to invest in bonds in particular, which we've seen and are generally seen as lower risk. But that had the effect of pushing money out of equities.
What we are doing is absolutely in the interests of pension fund holders, of people who are going to be needing to draw down a pension at the end of their lives. So Ontario Teachers' Pension Fund is one of the pioneers of modern pension fund management. It's about twice the size of its nearest counterpart in the UK and its returns are enviable.