M&G joined the Mansion House Compact in July 2023 as one of the founding signatories committing to allocating at least 5% of its default funds to unlisted equities by 2030.

Ciaran Mulligan, chief investment officer of investment management and oversight at M&G, spoke to IPE about the firm’s experience with private assets as an organisation.

According to Ciaran Mulligan, chief investment officer of investment management and oversight at M&G, the firm as an organisation is “very well versed in investing in private assets”.

He said that M&G’s journey into private markets started with real estate and then developed through the private assets’ spectrum including private equity. It has an exposure of around £25-30bn (€30-36bn) to private assets across its Prudential With-Profit fund, with £5-7bn worth of private equity investment exposure.

He disclosed that M&G’s largest fund, which is a With-Profits fund holding over £120bn worth of customer assets, has generated “good outcomes” over the longer term by investing across a wide range of asset classes, with private assets being the “key cornerstone of that”.

Mulligan said that some of the defined contribution (DC) pension funds already invest in its multi-asset fund alongside retail investors, adding that the fund allows access to a “broad range” of asset classes including public market equities, fixed income and private assets.

He noted that having access to the £120bn With-Profits fund, allows M&G to have access not only to different asset classes but to be very diversified both geographically and across asset classes.

Ciaran Mulligan - July 2022

Ciaran Mulligan at M&G

There is also the PruFund, which is effectively a “smoother” fund, he continued, which invests in a broad range of asset classes, but it looks to give the end investor a smooth return.

“It’s trying to protect the underlying investors in that fund from market volatility as much as much as possible.”

Mulligan said that being experienced in private assets, the firm realises the “valuable role” the market plays in outcomes for customers.

He pointed out that M&G clients are “materially influenced” in a “positive way” by accessing not just public markets but private markets as well. This includes private equity but also real assets, infrastructure and real estate.

Mulligan said the industry is currently trying to understand how DC funds can access those private markets.

“Usually, there are some regulatory reasons or cost reasons that DC funds will struggle with. One of the things that we’re quite excited about is trying to make sure that we can make those private assets that we have a history of investing in available to as wide a population as possible, including DC pensions, and that’s something that we’re working on.”

He said that M&G’s independent governance committees are encouraging the firm to explore “innovative ways” of trying to include private markets into DC strategies.

“In terms of actually accessing alternative markets, we can start with listed alternatives and over the next couple of years try to actually get some physical private assets,” Mulligan continued.

But he pointed out that investing in private assets is “complex”.

“You have to have a deep skill set in terms of how to access those private assets. We’re fortunate to have an excellent capability of organisation of private assets within M&G in terms of actually managing those assets within a larger portfolio, which could also be a DC portfolio,” he said.

“Having a history of managing those funds is very different than managing a purely public markets portfolio. You do have to manage extra areas such as liquidity such as cash flow, meeting commitments – we’re in a good position because we have the history of doing both the origination and the money managing of those,” he added.

Mulligan pointed out that M&G’s With-Profits fund is already available for DC pension funds to invest in, but there are also other ways in which DC funds can access these assets, but he stressed that there is a cost cap that has to be considered with these.

“With the skill set that we have, tackling those becomes a little bit easier than starting from a blank piece of paper,” he said.

Mansion House Compact explained

The Mansion House Compact is a commitment announced by the UK chancellor Jeremy Hunt in his keynote policy speech at the Mansion House, the official residence of the Lord Mayor of London, on 10 July 2023.

It calls on DC pension schemes to boost investment in UK unlisted equities.

As part of the compact, signatories are expected to allocate at least 5% of their default funds to unlisted equities by 2030.

Currently, the DC schemes’ investment in UK unlisted equities is under 1%.

According to the chancellor, if the UK’s DC market follows suit, this could unlock up to £50bn of investment into high-growth companies by that time.

The initial signatories of the compact included Aviva, Scottish Widows, Legal & General, Aegon, PhoenixNESTSmart Pension, M&G and Mercer. Since then, Aon and Cushon have joined as signatories of the compact.

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