Three in five asset managers are exploring launching long-term asset funds (LTAFs) as momentum grows for defined contribution (DC) pension schemes to invest in private markets.
Providers including Aviva Investors, Legal & General (L&G) and Aegon Asset Management have launched LTAFs, which are designed to enable DC funds to allocate to illiquid asset classes such as private equity and private debt.
Appetite for these asset classes and for the LTAF structure is expected to increase following the announcement of the Mansion House Accord, which will see DC pension schemes and providers aim to allocate significant proportions of their portfolios to private market assets.
A recent survey from WTW showed that only 14% of asset managers had launched an LTAF for DC clients. However, 62% said they were either developing one or considering doing so.
WTW said the poll of 21 asset managers at a recent industry event indicated that industry appetite for LTAFs was “building quickly” and the market could grow significantly.
Private debt was the most commonly cited asset class for future LTAF launches, ahead of private equity.
Ellie Lloyd Jones, director of investments at WTW, said LTAFs were expected to be a “meaningful contributor” to asset flows into private markets assets in the wake of the Mansion House Accord, with the government expecting £25bn to be invested in the coming years.
“We expect a new, steadier but likely inevitable phase of growth for LTAF offerings, with the majority of major investment managers likely to have a full offering within two to three years,” Lloyd Jones said.
L&G marks first anniversary of private markets LTAF
L&G’s Private Markets Access Fund has reached £1.3bn in assets under management in its first year of operation, the financial services giant announced today.
“As private markets continue to open up to new DC and DB members, we expect a continued focus on private markets strategies that can offer income and growth together with positive societal benefits.”
Eric Adler, L&G
The fund provides private markets exposure to DC clients and L&G’s master trust, as well as defined benefit (DB) pension schemes. The company aims to invest at least 10% of its DC default funds in private markets by 2030, in line with the aims of the Mansion House Accord.
Eric Adler, chief executive officer of L&G’s asset management business, said: “As private markets continue to open up to new DC and DB members, we expect a continued focus on private markets strategies that can offer income and growth together with positive societal benefits.”
