UK – The inability of defined contribution (DC) pension funds to invest in illiquid assets has meant they are only able to access "inferior" investments compared with defined benefit (DB) counterparts, a panel of asset managers has argued.
Publishing a white paper on how daily pricing requirements affect UK DC funds, the DC Investment Forum (DCIF) argued that the regulatory hurdle meant members were being denied access to the benefits of diversification and the illiquidity premium.
The DCIF, a working group consisting of seven asset managers including Axa Investment Managers and JP Morgan Asset Management, warned that the current lack of diversification meant members could fail to reach retirement outcomes.
In the paper, the DCIF said DC members were receiving inferior investment services compared with DB members due to restricted access to asset classes.
Additionally, it argued that certain investment strategies – particularly illiquid ones – were currently out of reach for DC schemes due to daily pricing and trading requirements.
"This disadvantages DC members through denying them the benefits of diversification and the illiquidity premium," it said.
The DCIF called on the UK government to relax the daily dealing requirements currently in place for DC schemes.
It added: "This is not without its challenges, and the DCIF encourages the sharing of best practice and the championing of the cause by industry trade bodies like the National Association of Pension Funds and the Investment Management Association."
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