Pension provider Cushon will utilise the new Long Term Asset Fund (LTAF) structure when it launches much vaunted private market portfolio early next year. It is understood that it will be one of the first pension providers to launch these new investment vehicles, designed to facilitate DC investment into illiquid assets.
Given its relatively young membership, Cushon says it is targeting a 15 per cent allocation to private equity within its default strategy with many of these assets helping it move towards its net zero goals.
Talking at the CA Summit, Cushon director of proposition Danny Meehan also said the company was also looking to include more natural capital within its default portfolio, and this global portfolio is likely to be in partnership with another master trust provider.
Natural capital investments can include forestry but are now looking at wider range of assets, including sea grass and sea weeds. Meehan says that as well as offering helping pension providers meet net zero objectives, these assets offer diversification and help with member engagement.
Cushon currently offers a ‘net zero now’ pledge via its use of carbon offsets. Meehan says that its private market portfolio is an important part of its net zero target and reducing overall emissions from its portfolio.
But in a presentation, called ‘the long and winding road to net zero’ Meehan said the journey to introduce greater allocation to private markets “had not always been easy”.
Meehan revealed that initially the pension providers had planned to invest in private market assets, such as solar and wind farms, through a Luxembourg Real Assets Investment Fund (RAIF). However this had fallen foul of FCA regulations, specifically FCA COBS 21.3, which appear to cut across core climate friendly infrastructure investments in a number of different areas. Cushon said it understands this to be an unintended consequence of the drafting of these regulations.
The company is now looking to own these assets through the recently launched LTAF structure. One of the advantages this offered is that there is no requirement to look through to the underlying assets.
Cushon also revealed that it had recently won the mandate to provide the pensions to Stella McCartney fashion house – a company that has long championed green causes including ecology, animal welfare and greater sustainability.
