DC schemes need to focus on solution design and selecting experienced private market managers to ensure that these investments deliver better outcomes for members.
At the Corporate Adviser Summit, Aegon’s Michael Robinson set out the approach being taken by the pension provider. Robinson emphasised the need for a holistic approach and the importance of scale when it comes to maximising potential returns.
Robinson said that scale is critical not only for managing liquidity but also for delivering bespoke solutions that can be cost-effective.
“It is right that there is now a greater focus on value,” he said, “but there is still a conversation to be had around the price of private market investments.” He added that, given the pricing pressures in DC schemes, cost remains an important factor. Incorporating the 2/20 pricing model—common in many private market investments—“would be challenging within the DC landscape,” he said.
Robinson pointed out that providers like Aegon supported the Mansion House Compact but were not starting to invest in these areas simply because the government wanted funds to support the UK economy.
“We are sometimes asked if we are just doing what the government is asking. But the reality is that Aegon has been looking to develop capabilities in these areas for several years.”
Providers like Aegon will be looking to work with trusted and established private asset managers, he said, across different asset classes. This includes areas such as forestry and real estate, as well as private equity, private debt, and venture capital.
Robinson pointed out that private equity returns have significantly outperformed listed securities over the past 20 years. “We’re often asked if now is the right time to invest in private markets. You could argue that 20 years ago would have been the best time, but the next best time is now.” He said investment into these areas was supported by initiatives like the Mansion House Compact and regulatory reforms such as Long Term Asset Funds (LTAFs), which are helping to facilitate investment in this area.
Aegon was looking to run its own LTAFs, he said, and might potentially run three separate funds.
Robinson added that the inclusion of private markets within the default fund would mean the provider would reduce investment in its active multi-asset funds. These have not necessarily delivered the desired returns for members, he said.