UK minister encourages pension funds to invest in private markets

The UK’s pensions minister is encouraging defined contribution (DC) pension fund managers to invest more in private markets.

In an interview with the Financial Times, Torsten Bell said that he was in “very active discussions” with DC fund managers about increasing their voluntary allocation to private assets, although he added that he was “encouraging investing in a wider range of assets, not instigating”.

The government’s pension investment review, which was launched by Chancellor Rachel Reeves in July, is set to be published later this spring.

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Bell said it would provide “end point clarity” on how policy reforms will boost investment in productive assets.

UK pension funds have relatively low allocations to private markets, compared to other countries like Australia, although interest and demand is on the rise.

The Financial Conduct Authority last year set out new rules for Long-Term Asset Funds (LTAFs) – which are designed to encourage investment in long-term, illiquid assets – to make it easier for DC investors to access private markets investments.

Asset managers including M&G Investments and Aviva Investors have already launched vehicles that will target the DC market.