Guy Fraser-Sampson, founder and partner at venture capital specialist Mowbray Capital, has blamed the U.K. lay trustee system for the recent closure of its European venture capital fund-of-funds. He said pension fund trustees are hand picked from the public, such as plumbers and electricians "who probably haven't even got O level maths," to spend an average of four hours a year, according to National Association of Pension Funds' figures, making investment decisions for their pension schemes. He added that trustees would need to delegate their investment responsibilities to professionals for better investment decisions.
 
Investment consultants also posed a problem when Mowbray tried to present their business model. Several were hostile towards his idea of a European VC fund-of-funds, with the majority refusing to meet for a presentation. Geoff Singleton, senior investment consultant and head of Hymans Robertson's private equity research, was one of the few investment consultants that agreed to a presentation. However, he said Mowbray's move was a niche idea in an unpopular area in the U.K. "Pension funds' view on private equity is quite simple—adopting a core/balanced approach to get exposure to all markets [geographically and sector wise]," he explained. U.K. schemes "are not looking for niche strategies in private equity."
 
The concept of such a niche product was a result of Fraser-Sampson's naïve approach to the U.K. market, he explained. "I was out of the U.K. market for 10 years and we thought we knew better," he quipped. He admits this idea may be ahead of its time, and when investors realise its potential, money will be invested for "all the wrong reasons."
 
Singleton said "we encourage clients to invest through the fund-of-funds route. This ensures that the client benefits from appropriate manager diversification and the skill of the fund-of-funds manager in selecting private partnerships." He added that investors could achieve above-average returns and have a better access to successful funds than investing through a single fund. He admitted, however, that "the biggest impediment to this is the governance structure of most trustee bodies which can make decisions of this type difficult at best."
 
"Their clients are idiots," said Fraser-Sampson regarding consultants. Trustees are still of the opinion that VC is a risky asset class, which it can be if invested in single funds, but not through a fund-of-funds, he explained.
 
Fraser-Sampson together with partner Nick Sedgwick and principal Joe Schorge abandoned a fundraising effort for a VC fund-of-funds earlier this month; they managed to raise approximately GBP50 million, half their target. Fraser-Sampson has always been vocal about the advantages of investing in VC, and he claimed he would not stop here. He is due to publish a book on multi-asset class investing in June and is likely, after this, to get sucked back into the private equity world or take up a position at a pension fund as a cio, he concluded.