Wrapper vs. Catalyst

Analysis of the Sterling 20 Group – Separating Political Mandate from Operational Reality.

On 21st October 2025 at the Regional Investment Summit in Birmingham the Chancellor announced the Sterling 20 investor partnership. 

The Sterling 20 is a formal partnership of 20 major UK pension and insurance providers, created in coordination with the Government and the City of London. Sterling 20 is a publicly codified, non-binding strategic alliance designed to pursue common investment goals, not a single legal entity. 

Our core assessment is that it is fundamentally a political wrapper for existing capital. However, this wrapper serves as a powerful catalyst for necessary systemic change by imposing coordination and accountability on the deployment of long-term institutional funds. Its value is in de-risking the asset class at a macro level, not in solving individual deal flow issues.

1. The Mandate and Membership

The partnership is the operational arm of the UK’s push to increase domestic investment, building on the Mansion House Accord’s intent to raise DC scheme allocation to private markets.

Core Members (The Sterling 20)

The Investment Imperative

These institutions are bound by fiduciary duty. The partnership’s existence implies they believe that collectively addressing three key barriers will deliver better long-term returns for their members:

1. Standardisation: Lack of a standardised product—such as the long-term asset fund (LTAF), an FCA-authorised vehicle for illiquid assets—suitable for daily-dealing DC schemes.
2. Liquidity: Low liquidity in long-term UK private assets deters investment.
3. Governance/Cost: Complexity and cost disclosures often penalise illiquid asset investment.

2. Fund Manager Revenue Structure

The funds participating in the Sterling 20 generate revenue from the member pots via a two-part charging mechanism, a structure the industry successfully lobbied to reform in order to make illiquid asset investment viable.

3. Strategic Flaw: The “Pipeline” Myth

The primary justification cited by the Treasury – that the group will “identify” deals – is politically motivated and fails to recognise the commercial reality:

• Deal Flow is Pre-Existing: Large institutional asset managers already have highly sophisticated teams for deal management. A lack of opportunities is not the core problem so much as the ability to employ capital successfully and rapidly.
• The Constraint is Structure: The actual barrier is the difficulty in structuring regional projects (e.g., local infrastructure, social housing) into a format that meets the specific risk, return, and regulatory profile required by all 20 funds simultaneously.
• No Shortcuts: The initiative announced no new planning, regulatory, or administrative shortcuts to speed up project approval. This is the single biggest operational weakness and source of continued execution risk. Projects remain hostage to local authority and national planning delays.

4. Operational Value: De-risking and Efficiency

The Sterling 20’s true contribution lies in its collective impact on the investability of the asset class:

1. Collective Lobbying Power: The unified voice of £3 trillion in AUM has significant influence. This power is strategically used to demand systemic regulatory de-bottlenecking (e.g., simplifying the regulatory regime for Long-Term Asset Funds (LTAFs)) which benefits all members equally, without breaching competition rules.
2. Asset Standardisation: The dialogue within the group drives the mandatory consensus needed to design common frameworks for packaging infrastructure and housing debt/equity. This mass standardisation creates scale, improves liquidity, and ultimately lowers the cost of deployment for all participants.
3. Accelerated Deployment Mandate: Public commitments by funds like L&G (£2bn) and Nest (£100mn) place the onus on fund managers to accelerate capital deployment. This political pressure acts as a powerful governance mechanism to force cash off the sidelines.

Conclusion & Outlook

The Sterling 20 is not a spontaneous eruption of new capital but rather an imposed coordination mechanism designed to accelerate the fulfilment of pre-existing investment policy.

Its success hinges not on the government’s ability to “find” projects, but on the members’ ability to mass-produce suitable, standardised asset wrappers (e.g., LTAFs) fast enough to satisfy the accelerated political deployment window. If successful, it will drastically improve the financing environment for large-scale, long-term UK projects. If not, it will confirm the view that it was merely political grandstanding.