UK pension funds doubled their investment in unlisted equities over the past year, though they remain below the levels needed to meet a pledge to the government to support private businesses.
Eleven firms that signed the Mansion House Compact two years ago had increased allocations to private markets to 0.6% of defined-contribution default funds by February, up from 0.36% a year earlier, according to the Association of British Insurers.
They now have £1.6 billion of unlisted equities within default funds — where pension savers’ money automatically ends up, until they choose different investments — up from £800 million a year earlier.
The firms signed a voluntary compact targeting a 5% holding in unlisted equities by 2030, with a further accord this year setting the same goal for UK-specific private assets.
Chancellor of the Exchequer Rachel Reeves has increased pressure on pension funds to do more to support the UK economy, following years of outflows from domestic assets. Private markets are meanwhile attracting a wall of money from investors, with roughly $13 trillion globally tied to assets including private equity and debt.
Yet the ABI paper on Thursday shows signs of hesitancy to go further. Just four of the 11 signatories saw their clients as supportive of raising investment in unlisted equities, down from seven a year ago. Cost concerns, performance fees and restrictions on pensions’ investments were cited as barriers.
The report comes at a time of heightened nerves around certain corners of the private markets, with the collapse of Tricolor Holdings and First Brands Group exposing the risks in the private credit space.
Written by: Meg Short @Bloomberg
The post “UK Pensions Boost Private Investment But Lag Behind Reeves Goal” first appeared on Bloomberg