The Pensions Regulator ("TPR") has issued guidance for trustees of occupational pension schemes who are considering investing in private markets. This follows on from the Chancellor’s 2023 Mansion House reforms, which were designed to “enable our financial services sector to unlock capital for our most promising industries and increase returns for savers, supporting growth across the wider economy.” The guidance seeks to highlight the opportunities private markets investments provide, particularly emphasising that they can play a valuable part in a diversified portfolio to help schemes deliver improved outcomes and value for money.
The guidance covers:
- a general overview of the classes of private markets assets (that is, private equity, infrastructure etc.);
- the opportunities and risks private markets assets can present;
- the legal duties of trustees when investing, including having a diversified portfolio and ensuring that the portfolio is predominantly in assets that are traded on a regulated market; and
- key considerations and specific matters to consider as trustees of defined benefit and/or defined contribution schemes, such as knowledge and understanding, taking appropriate advice, performance fees etc..
Every scheme's capacity and willingness to invest in private market investments will depend on a number of factors, including the type of funding, the strength of its covenant and its maturity. The guidance provides a useful table that illustrates at a high-level how the potential appetite for such investments might vary depending on those factors. Having the right governance is key and deciding appropriate budget and model is crucial to complying with regulations and scheme requirements.
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