Speaking at the Pensions and Lifetime Savings Association’s annual conference in Liverpool today, Steve Charlton, defined contribution (DC) and solutions managing director at SEI, said that mandating pension funds to invest in illiquid assets would lead to worse outcomes for members.
He said SEI is a “fan” of illiquids, investing around £14bn in various types of illiquid assets on behalf of its pension fund clients, including in infrastructure, structured credit, private equity and venture capital.
He said he was “pleased” that the market is “starting to recognise that you can get illiquids if you put enough brain power behind it into DC”. However, he warned the government should not mandate pension funds investing in the asset class.
Yesterday, in her keynote speech pensions minister Emma Reynolds refused to rule out mandating UK pension funds investing in illiquid assets saying the government is still considering all available options.
Charlton said: “The chair of our investment subcommittee and many others in our trustee group, and many others in the room, are worried about this. They’re worried about the fear that they’ll be a forced buyer in a market.”
He pointed out that this could lead to higher prices and lower quality of opportunities which would lead to worse outcomes for members.
He acknowledged that the government expects the pension pot value to increase by £11,000 as a result of illiquid investing, however, Charlton said this can only happen in a “normal functioning market”.
And if illiquid investing is mandated, the market “will change”, he said, adding: “[Members] won’t get a good outcome if those dynamics exist.”
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