Two projects designed to boost investment in local ‘growth’ companies and domestic assets were in the news last month, but for different reasons.

As detailed on the opposite page, the UK has launched a £500m (€567.3m) funding programme aimed at getting funds to invest in venture capital, an asset class that can be tricky to access for big schemes. The EU has a similar €410m project up and running, with European Commission vice-president and former prime minister of Finland Jyrki Katainen making an impassioned plea in April for pension funds to back small, high-growth businesses.

However, it is not a case of ‘build it and they will come’. A domestic investment programme in the Netherlands has just closed its doors, having only managed to invest a quarter of the money it raised from investors. It aimed to help the Dutch economy recover from the financial crisis but proved an unnecessary intermediary, with the likes of investors APG and PGGM already able to make direct investments.

Politicians must understand that pension funds are not an ATM to be tapped at will to supercharge an area of the economy. George Osborne, former head of the UK Treasury, made this mistake when he first announced what became the Local Government Pension Scheme’s (LGPS) pooling project, announcing the creation of “British Wealth Funds” from LGPS assets to invest in local infrastructure. He was criticised swiftly – and correctly – by local authority staff who pointed out that, quite simply, he had no right to direct the investment of private individuals’ pension savings.

It is tempting, when talking about the entrepreneurial venture capital sector, to talk of big investments and high returns. Those running such projects should rein in their rhetoric and bear in mind the cautious nature of pension funds. The objective of this money is to pay retirement benefits, not create the next Uber or AirBnB.

Nick Reeve, News Editor