Another way to balance widening retail and pensions access to private markets with protecting investors, says Mercer partner James Brundrett, is making sure the quality of fund managers is high.
“There's a huge dispersion in the returns of these asset classes,” he says. “The difference between success and failure is big, and so it's important to go with the managers who have got a good track record. You want to be in at least the upper half of that universe.”
Besides LTAFs and widening retail and pensions access to them, the British Private Equity & Venture Capital Association notes another policy development that has made it easier for UK DC schemes to invest into private capital funds.
A critical barrier that prevented DC schemes from accessing private capital funds, the BVCA says, was a regulatory requirement for them to include carried interest when calculating whether the costs and charges attached to their investments were below the mandatory charge cap of 0.75 per cent for default/auto-enrolment arrangements.
The government subsequently removed ‘specified performance-based fees’ from the charge cap in April 2023.
Meanwhile, in terms of the current government, Cahani at Invesco says: “In both its manifesto and plan for financial services published in January, the Labour government made it clear that the party would seek to improve outcomes for UK pension savers and retirees, by encouraging consolidation across pension schemes and facilitating productive private market investment.
“With the announcement of a pensions bill in the King’s Speech, it appears that Labour is taking swift action to implement policy changes to achieve these objectives.
“For example, Labour has indicated it will carry forward measures outlined by the previous Conservative government to encourage consolidation of small pots, to require schemes to offer products which support decumulation as well as accumulation, and to establish a pensions value for money framework, among other initiatives.
“As always, we await the details of such initiatives, but the fact that Labour is taking such swift action to deliver on its pre-election commitments will be welcomed by UK pension savers and retirees.”
And with the introduction of the LTAF and the Mansion House Compact, Michael Robinson, investment proposition manager at Aegon UK, describes a “clear regulatory push” to invest in private markets.
He adds: “We welcome the new government’s introduction of the national wealth fund to mobilise capital into private markets, and we are keen to see more on this as it develops in the coming months.”
Chloe Cheung is a senior features writer at FT Adviser
