A UK government bill currently progressing through parliament to compel local pension schemes to allocate a portion of their funds to alternative assets, could inadvertently prevent schemes from counting investments in listed real asset fund managers, leading industry figures have argued.
In the Pension Schemes Bill, “qualifying assets” are defined as assets such as private equity, private debt, venture capital or interests in land – but exclude securities listed on a recognised investment exchange.
The Association of Investment Companies (AIC) is urging the government to amend the bill as it continues its passage through parliament, to include real asset investment companies.
These companies currently manage more than £100bn (€115bn) in assets such as infrastructure, property, renewable energy generation, private companies and start-up businesses, the AIC said in a statement.
The trade body, which represents the UK’s listed investment company sector, said that as the legislation is currently drafted, pension schemes would not be able to meet any future requirement to invest in private assets by using investment companies.
Richard Stone, chief executive of the AIC, said excluding investment companies from the bill simply did not make sense.
“[It] gives the government powers to mandate pension schemes to invest in certain types of assets,” Stone said.
“Let’s say these powers were used in future: pension schemes would be barred from using a fund structure which has been thoroughly road-tested as a way of accessing these assets. Leaving investment companies out of the bill doesn’t just undermine the UK’s world-leading investment company industry; it also risks restricting choice for pension schemes and harming pension savers.
“Sticking with this policy is a clear and avoidable own goal,” Stone added.
Part of the bill’s aim, the governmment has previously stated, is to force consolidation within the sector, resulting in fewer, much larger funds with better governance, lower costs and improved access to productive investment, which, the UK government hopes, will ultimately benefit savers.
Mike Gerrard, chair of International Public Partnerships (INPP), said: “The pension schemes bill presents a historic opportunity to channel more pension capital into national infrastructure and unlock private investment for growth. But as currently drafted, it excludes investment companies – the very vehicles that have already committed billions to UK infrastructure.
“That would be a missed opportunity at the precise moment the government is seeking to mobilise domestic capital. Including investment companies within the bill would broaden choice, reduce risk, and help deliver the government’s objective of channelling long-term pension capital into vital national infrastructure,” Gerrard said.
Richard Laing, chair of 3i Infrastructure, said: “Investment companies are an extremely effective route to investing in private infrastructure businesses and assets. Including investment companies in the pension schemes bill will enable the government to achieve its aim of encouraging pension schemes to invest more in private assets.”
AIC’s call is also supported by former pensions minister Ros Altmann, Sharon Bowles, and Jonathan Lipkin from the Investment Association, alongside other key industry figures.
To read the latest IPE Real Assets magazine click here.
