Labour are backing the UK fintech industry but could turbocharge the sector by pushing pension funds to invest more in Britain, a major City boss has said.
“Labour recognises the huge success that the UK fintech industry has had,” Tim Levene, CEO of Augmentum Fintech, told City A.M, as he noted the strength of the UK tech sector fit nicely with the party’s focus on growth.
“There’s a lot of support for what the industry is doing, what it has done, and what they can do to help continue to allow it to thrive,” he added.
However, while everything Levene has heard from the party on fintech has been “really positive”, he argued that it could still be doing more by looking into “creative ideas” for unlocking capital within pensions funds.
“What can they do to encourage pension funds to move quicker, I think that could have a really positive impact,” the chief exec said.
“Hypothetically, if I was coming in as Chancellor, that’s one of the first things I would be looking to do.”
Around four per cent of the London-listed shares are now held by pension funds, a sharp drop-off from the 39 per cent held at the turn of the millennium.
Now, there is an increasing call for the pension funds to push more capital into British businesses to support their growth.
“It’s less about changing regulation, it’s more about delivery”
If action isn’t taken to support fintech, “complacency is something that we need to be wary of”, he said, as countries like France increasingly feel they can take market share from the UK.
“There’s a huge amount of government support for the French tech sector and that has really transformed the French startup space,” Levene said.
Augmentum is an investment trust that focuses on fintech across Europe, but has a majority of its investments in the UK.
In its annual results today, the trust announced it had invested in a new FX trading platform, called LoopFX.
Backed by the likes of Martin Gilbert, the company’s CEO Blair Hawthorne is “one of the most impressive founders” Levene has met, he said.
“We recognise that the institutional spot FX market has a lot of challenges, huge inefficiencies, and the need for an institutional dark pool is well understood,” he added.
Despite making the new investment, the trust has been picky. While the number of fintech companies
Augmentum has considered investing in rose around 60 per cent last quarter, Levene said that the tech sector was just very expensive right now.
“Since IPO we’ve said no 99.4 per cent of the time, over the last 12 months we’ve said no 99.9 per cent of the time,” he said.
We’ve said no to a lot of opportunities where we’ve loved the businesses, we just don’t love the price.
As the public tech sector has gone wild with valuations, with companies like Nvidia shooting up in price, Levene has been eager for the trust to “not lose our head” on valuations, which currently sit at an average 4.7 times forward revenue multiples for the portfolio.
Augmentum’s top 10 fintech holdings represent around 80 per cent of the portfolio, and are growing revenue on average 65 per cent annually.
Five of the 10 are profitable, with the rest having an average of 20 months cash runway
Levene has also be keen for the businesses to no longer focus on “growth at all costs” for some of its mature businesses, as the CEO looks towards realising their value through sale or IPO.
However, the CEO did note that 95 per cent of fintech realisations came from mergers and acquisitions, with only five per cent coming from IPO, making the chance of one of Augmentum’s holdings making its way onto the London market unlikely.
