Targeting growth

In what will come as no surprise to anyone in the UK involved in managing retirement savings, growth assets dominated this year’s Pensions and Lifetime Savings Association investment conference.

Minister for Pensions Torsten Bell reiterated how the UK’s pension schemes will be central in meeting the government’s growth ambitions, although he refused to be drawn on detail before HM Treasury publishes its Pension Investment Review findings, which he promises will be with us "this spring".

Given the lack of a definitive publication date, pension schemes are left to surmise on whether they will be forced into allocating specific sums to homegrown productive assets, a term which itself is without clear definition.

What is clear, however, is that the government refuses to be embarrassed by retirement funds that have failed to embrace British businesses while their overseas counterparts not only plough considerable assets into their own domestic opportunities but also into start-ups and venture capital on UK shores.

Canadian public sector pension schemes have 22 per cent of their assets in private equity and 12 per cent in infrastructure, compared with 6 per cent and 5 per cent for British local government pension schemes.

Ian Brown, Head of Banking and Investment at the National Wealth Fund which was set up by Chancellor Rachel Reeves to channel institutional investment into UK growth projects, says it is time pension funds took more risk and invested in growth projects on home turf.

However, trustees are bound by law to act entirely in the interests of their members. No matter how much the government bangs the drum for domestic investment, specifically in private markets, unless it revisits policy - and indeed legislation that leaves trustees facing prison if they do anything the Pensions Regulator deems out of line with the funding code - then all this effort is rendered redundant.

And the government also faces a major challenge in ensuring there is a sustainable pipeline of suitable projects in which schemes can invest.

This week the government announced the Planning and Infrastructure Bill, which it says will "speed up planning decisions to boost housebuilding and remove unnecessary blockers and challenges to the delivery of vital developments like roads, railway lines and windfarms".

But whether the bill proves effective in removing red tape and making it easy for schemes to invest remains to be seen.

In the meantime, asset managers are hoping to capitalise on the hype surrounding UK private markets by taking advantage of the recently approved long-term asset fund (LTAF) regime.

This week M&G Investments announced a flagship diversified private credit strategy available to UK defined contribution pension schemes for the first time.

M&G says the LTAF launch is part of its ambition to grow its GBP73 billion market-leading private markets business by widening access to its strategies that "have the potential to enhance long term returns and improve investment outcomes".

No doubt this will be music to the Chancellor’s ears.

Gill Wadsworth, Editor, Institutional Asset Manager

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