Institutional Asset Manager Newsletter 26.04.24

UK pension pools target private markets

The march towards private markets continues this week with an announcement from a GBP35 billion local authority pension pool that it is seeking two private equity allocators to run funds worth a possible GBP 500 million annually.
The ACCESS pool, which is made up of 12 English county council pension funds, is just one of several Local Government Pension Schemes (LGPS) on a mission to appoint managers for real asset mandates.
This week we round up some of the live tenders up for grabs to private markets players, particularly those in the real estate sector.
The request for proposals come as no real surprise given the government's announcement last autumn that the notable assts available from the LGPS - and the UK’s defined contribution (DC) schemes - are in the crosshairs for shoring up the green transition and levelling up projects.
Last autumn, the government announced that the UK’s public pension pools – set to be worth GBP200 billion by 2040 - should aim for a 10 per cent allocation to private equity.
The tenders reflect the findings of another story in IAM this week which brings news that alternative asset, equity and fixed income fund managers expect alternative asset classes to see the biggest increase in fund raising in 2024.
Research from Carne Group covering 200 fund managers with USD1.6 trillion in assets under management (AUM), expect major increases in allocations this year to private equity; renewable energy, hedge funds, private debt and real estate.
Meanwhile, a second survey from the group, covering wealth managers and institutional investors including pension funds with USD1.7 trillion AUM, 71 per cent said they expect to increase their allocation to private equity by 10 per cent or more in 2024. Some 70 per cent said this about their allocation to private debt.
While the case for investing in private markets is made loud and clearly by proponents – the opportunity to manage volatility, diversify portfolios and bring outperformance over the long term – there is still plenty of dissent about the government intervening in pension funds’ investment decisions.
Not least of which comes from the LGPS Advisory Board which told the government last year that "increasing attempts by the Government to intervene in asset allocations is unhelpful. Statements from Ministers cheerleading particular asset classes, albeit well meant, are not relevant or particularly helpful to that process."
However, it seems that these warnings – and others like them – may have fallen on deaf ears.

Gill Wadsworth, Editor
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