The People’s Pension plans to invest up to £4bn in private markets by 2030, including a “substantial” UK allocation – but this is reliant on sufficient assets becoming available.
The £31bn master trust is building up an internal research facility and is recruiting for a private markets specialist to aid its plans. It recently hired Phil Butler from M&G as deputy chief investment officer to help lead its London-based investment team.
The move would be the first time The People’s Pension has allocated to private markets. It plans to begin investing later this year, it announced this week, with a view to growing the commitment steadily over the next five years.
In a statement, the master trust said: “A substantial part of this new allocation of assets could be deployed in the UK, if assets are available that meet the return requirements.”
The investment team, led by chief investment officer Dan Mikulskis, will initially focus on infrastructure and real estate. However, investments “will be dependent on… being able to access a dependable pipeline of good quality investable assets”, the pension fund said.
Dependable pipeline of assets needed
Master trusts backing private markets
Fellow master trust Nest has been allocating to private markets since 2019 when it hired private debt managers including BlackRock, BNP Paribas Asset Management and Amundi Asset Management.
In 2022 it appointed Schroders Capital to run its first private equity mandate. Nest has been investing in real estate for more than a decade through a partnership with Legal & General Investment Management.
Meanwhile, Smart Pension – a £6bn master trust – began investing in private markets in 2021 and now allocates approximately 6% of its portfolio to such assets.
Last year, Patrick Heath-Lay, chief executive officer of the master trust’s parent company People’s Partnership, lamented the lack of options available to pension schemes when allocating to private markets.
He told delegates at the Pensions and Lifetime Savings Association’s annual conference in Liverpool in October that asset owners needed more support and incentives to meet the objectives set out in the government’s investment review.
He said: “I’m not sure we’ve seen the investment industry particularly come up with the products that can work for asset owners like us.
“I think that the balance of the economics in some of the vehicles that are brought to us just don’t work enough for the members.”
This week, CIO Mikulskis said: “As one of the fastest growing asset owners in the UK, our in-house investment expertise has grown significantly over the last 12 months and this journey will continue with the imminent appointment of a private markets’ specialist, broadening our investment reach.
“In order for us to invest in private markets over this period it’s critical that the wider investment community, with support of the government, provides a dependable pipeline of investable opportunities which deliver good value for our 6.8 million savers.”
‘Pivotal time for UK pensions’
Heath-Lay added: “We’re at a pivotal time for UK pensions with the government indicating a direction of travel toward scale and value for savers.
“As an independent £31bn master trust, without shareholders, we believe that now is the time to increase our investment in private assets for the benefit of our savers and the growth of the UK economy. The People’s Pension has a vital role to play in this exciting plan for the future of UK retirement savings.”
Chancellor Rachel Reeves also commented on the master trust’s plans, which she said would “help drive economic growth and support our milestone of improving living standards across the UK”.
This week saw the closure of the government’s consultation on scaling up defined contribution pension schemes including master trusts, with a key aim of increasing their ability to invest in domestic private markets.
The government has proposed a minimum size requirement for master trusts of £25bn to further this aim, but several respondents pushed back on this, arguing that larger pension schemes were no guarantee of specific investment strategies or innovation.
