The opportunity for private markets investment marks a significant development for defined contribution (DC) pension schemes. Traditionally, DC pensions have focused on listed assets like bonds and equities, which are easily traded on public markets. However, the introduction of long-term asset funds (LTAFs), a new fund structure launched by the FCA in 2021, has made it easier for DC schemes to invest in a diversified range of asset classes including private markets. This unlocks access to new and innovative investment opportunities, previously not available to workplace savers.
Integrating private market investments into DC schemes can offer members significant benefits, such as potentially higher risk-adjusted returns and increased diversification. Private markets can offer access to innovative and fast-growing businesses, including opportunities that align well with investors looking for long-term growth.
What are private market investments?
Private markets can include a wide range of investments such as private equity, private credit, infrastructure, forestry and real estate. What these investments have in common is that they are businesses, ventures or projects that are not traded on the stock exchange.
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Aligning to our goals
Our plans to integrate private market investments into our workplace pension offering supports four key aims:
Improve member outcomes, by offering members value for money and unlocking new and innovative investment opportunities for workplace savers.
Support our commitment to halve greenhouse gas emissions for our pension default fund range by 2030 and to achieve net-zero emissions by 2050¹.
Help us meet our pledge to invest £500 million by 2026 to climate solutions – investments that directly contribute to climate change mitigation and/or adaption, such as investment in renewable energy.
As a founding signatory of the Mansion House Compact, we aim to invest at least 5% of our default fund assets in unlisted equities by 2030.
¹Measured using carbon footprint across our full range of default funds. Emissions targets don’t apply to individual funds. 2030 target based on 2020 start date and applies to scope 1 and 2 emissions from listed equities and corporate fixed income only.
Evolution of our Universal Balanced Collection
In June 2024, we announced plans to significantly evolve our largest workplace default, the £12 billion² Universal Balanced Collection fund, introducing innovative private market investment in addition to enhancing the integration of environmental, social and governance (ESG) factors.
The transformation, which has already started, targets improved outcomes for over 700,000 members² currently invested in the fund. It aims to provide better risk-adjusted returns and value for money, offering access to a wider range of responsible investment opportunities.
We've partnered with three leading fund managers to provide a bespoke solution, leveraging their dedicated, specialised expertise and resource.
In future, these enhanced capabilities will provide members across our wider workplace default range with access to such innovative investment opportunities.
Capital at risk.
² As at June 2024
To find out more please speak to your usual Aegon contact.
The value of investments may go down as well as up and investors may get back less than they invest.
Private market investments introduce illiquidity risk. This risk arises because private market investments, such as private equity, real estate, and certain types of debt instruments, are not as easily sold or converted into cash, compared to public market investments like equities or bonds.
In extreme conditions, illiquidity can lead to deferred payments, meaning investors might not be able to access their investment when desired. It’s important for investors to review the terms and conditions of their investment policies to understand the potential for payment deferrals and any changes that might occur, while noting that these are subject to change.
