FCA News

Productive finance working group publishes recommendations addressing the barriers to investment in less liquid assets

  1. The final report, ‘A Roadmap for Increasing Productive Finance Investment’.
  2. Further details on the Productive Finance Working Group, including Minutes from their meetings.
  3. FCA CP21/12: A new authorised fund regime for investing in long term assets Opens in a new window.
  4. the work of the group has been welcomed by a number of industry participants:

Michael Moore, Director General of the BVCA, said:

‘The Productive Finance Working Group is a hugely significant initiative. Not only is it encouraging collaboration and the sharing of perspectives from across the financial services sector, it’s also tackling the challenges faced by certain types of investor that are currently excluded from the impressive returns of private equity and venture capital funds.

‘The BVCA welcomes its involvement in the group and the opportunity it has had to provide data and guidance on investing in this sector. We are confident that the group’s recommendations can help defined contribution pension schemes and other investors along the path towards allocating to our asset class. We look forward to supporting the group’s ongoing workstreams.’

Anne Richards, CEO of Fidelity International:

‘We warmly welcome the steps being taken to increase the investment opportunities available to members of defined contribution schemes as we believe this could ultimately lead to better outcomes for long-term savers. Making it a reality will require collaboration from a policy, regulatory, tax, industry and wider stakeholder perspective and the recommendations made by the Productive Finance Working Group are an important step forward. We look forward to continuing to work together to achieve the best outcomes for our clients.’

Chris Hill, Chief Executive Officer, Hargreaves Lansdown, said:

‘Over the last 18 months many have reassessed their finances and started to consider their plans for later life, with many investing for the first time to build their financial resilience. We are all responsible for our own retirements, so Hargreaves Lansdown particularly welcomes the recognition of the rights of retail investors and their importance to the UK economy in the report.

‘When people have enough savings for emergencies and the time to invest for the long term, they should have the option to access these types of opportunities as part of their investment portfolio. Providing the right information to ensure investor knowledge and understanding of the risks of these new funds will be essential for their safe distribution.’

Chris Cummings, Chief Executive of the Investment Association said:

‘Investing in illiquid assets is a way for savers to diversify their portfolios and at the same time provide capital for long term projects which boost the economy. The Long-Term Asset Fund will offer DC pension schemes and certain retail investors a new way to access illiquid investments through a fund structure designed specifically for such investments.

‘We welcome this report, in particular the work done by the Productive Finance Working Group to identify barriers to distributors offering funds with limited redemption opportunities and the commitment to look closely at allowing the LTAF to be sold to a broader range of retail investors with appropriate safeguards. We look forward to working with policy makers, investment managers, distributors and other organisations to take forward the report’s recommendations to make the LTAF a success and increase the supply of productive finance in the UK economy.’

Ruston Smith, Chair of the Tesco Pension Fund, said:

‘Many members in defined contribution schemes typically have long term time horizons and, in delivering good member outcomes, good quality illiquid assets can contribute towards improved diversification and future net risk adjusted returns. Other countries’ DC schemes and UK DB schemes have, for some time, included appropriate allocations to private markets as part of their aim of delivering good member outcomes.

‘Following the success of automatic enrolment, this initiative is incredibly important to further improve the incentive and accessibility of good quality illiquid assets for UK defined contribution schemes and their members. Further support from consultants and on trustee education, in this important area, will help provide good informed decisions and the further development of UK DC investment strategies.’

John J. Haley, CEO, Willis Towers Watson

‘Willis Towers Watson views the report produced by the Productive Finance Working Group as a critical step forward in getting more illiquid, productive investments into Defined Contribution schemes, thereby improving the investment outcomes for millions of Defined Contribution members in the UK; We are proud to have been an active participant in the project.

We recognise there remains work to be done in this area, and we look forward to continuing our work with other committed stakeholders to further improve the UK DC market.’

Original Article Here

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