Switzerland-based investment manager Partners Group is launching a private markets fund designed specifically for use by UK defined contribution (DC) pension plans, allowing the schemes requiring daily pricing access to private equity, private debt, private infrastructure and private real estate.
The fund, named the Partners Group Generations Fund, will allow DC sector access to these private markets but also provide daily liquidity and pricing as well as meeting the regulatory requirements DC platform providers have for standardised purchase and redemption procedures, the firm said.
While claiming the new launch is the first to allow UK DC funds access to private market holdings, it is not the first vehicle to allow DC investors access to traditionally less liquid holdings – such as real estate, for which Legal & General Investment Management (LGIM) launched a proposition in 2011.
André Frei, partner and co-chief executive at Partners Group, said: “Private markets asset classes have long been an important source of returns for defined benefit pension schemes, but until now UK DC pension schemes have been unable to invest in them for structural reasons.”
He said the firm had talked to DC plan sponsors when designing the fund.
“As the pensions market worldwide continues to evolve and become more sophisticated, we expect private markets firms like Partners Group will become increasingly involved in DC investment management,” Frei said.
The fund is structured as a non-UCITS retail scheme (NURS), in contrast to the illiquid limited partnership vehicles traditionally used for private markets investments, the firm said.
The underlying portfolio includes “a significant allocation” to return-seeking private markets asset classes, and an allocation to a yield-seeking credit portfolio, it said.
It is given liquidity by having some assets invested in diversified listed private markets, the firm said.
Partners Group added that the fund was designed “to be included as a performance driver within a professionally-managed DC plan,” for example as part of a corporate scheme’s default fund in the growth accumulation phase.
The question of illiquid investments has long been a troublesome question for UK DC funds, with Russell Investments five years ago calling for the development of products allowing daily pricing with access the illiquid asset class.
The £830m (€1.1bn) National Employment Savings Trust in 2013 appointed LGIM to a property mandate investing in Real Estate Investment Trusts, although the DC scheme also has a system in place allowing for it to sell holdings between cohorts to avoid the future sale of less liquid assets.