Now Pensions considers future illiquid investments [amended]
UK – It will be years before Now Pensions – the UK venture launched by Denmark's ATP – is able to invest in illiquid assets, the fund's CIO has said, citing both its lack of data about membership movement and its relatively small size as hurdles.
Mads Gosvig, chief executive at the Now Pensions Investment, the Hillerød-based investment manager for the UK defined contribution (DC) fund, said the fund's current portfolio was "very global" and built around the same ideas employed by ATP.
"Our exposure to credit, our exposure to equities, our exposure to commodities, that is a global approach – we re-use the way we invest at ATP," he told IPE after addressing the GNP conference in Milan last week.
He added that Now Pensions, at present, had a higher exposure to UK equity than its Danish parent, but he said the arrangement was unlikely to be permanent.
"Going forward, we will be much more global," Gosvig said. "The idea is to have a global portfolio with no particular UK exposure."
However, he conceded that the UK fund's relatively smaller size meant illiquid investments were problematic at present.
"ATP has a higher level of illiquid investments, but we are not of the scale to be doing such things," he said.
"The way we will approach illiquid investments is that we will need to see how people move between companies and learn about the approach – this is years in the future."
Gosvig said it was key for the fund to understand how its members would behave when moving from employer to employer.
"Once we know the patterns, we will know how much liquidity we will need in order to pay out money as members transfer to the next employer's pension fund," he said.
His comments, in reference to proposed automatic transfers of pension pots as members switch employers, come after the National Association of Pension Fund's chairman Mark Hyde Harrison warned that the pot-follows-member approach would discourage long-term investment.
However, Gosvig anticipated that Now Pensions would eventually be able to partner with ATP in accessing certain illiquid assets such as property.
"There is a global real estate part of ATP we could buy into and be a partner in," he said.
"We could reuse the vehicles ATP has created for their global investments on the illiquid side."
ATP currently has DKK10.8bn in investments with ATP Real Estate Partners, responsible for its indirect holdings, and a further DKK12.4bn with ATP Ejendomme, which manages its direct holdings.
Speaking on behalf of ATP during the panel in Milan, Gosvig also said the idea behind launching Now Pensions was to "make money for our Danish members" by using the DKK767bn group's investment skills outside of its domestic base.
"Doing cross-border pensions in Europe should, from a theoretical perspective, be fairly easy," he added, noting that the common financial market of Europe should lend itself to a similar approach to pensions, although this was not the case.
"Moving into one country," he said, "trying to do something in the UK as we have been doing in Denmark, is much more complicated than we thought. "
However, he encouraged other pension managers to follow in ATP's footsteps and consider ventures outside their domestic base.
"The trend should be to have more globalisation of these investments," he said.
"The investment side, that is a global, not a local thing, which is why this would make a lot of sense for a lot of pension businesses."