Scottish Widows is the latest pension provider to unveil details of a new long-term asset fund, designed to boost investment into private markets.
The open-architecture LTAF will be launched later this year, pending regulatory approval. Scottish Widows says this offers greater flexibility, control and operational simplicity when compared to investing in a range of LTAF sub-funds under different asset manager umbrellas.
Scottish Widows has appointed a number of partners to deliver the LTAF. To support the open-architecture structure, Carne will serve as the Alternative Investment Fund Manager (AIFM), with Aberdeen Investments and BNP Paribas Asset Management selected as the initial managers of growth and credit sub-funds respectively.
Scottish Widows is part of the Lloyds Banking Group has around four million workplace pension customers across the UK.
The LTAF will offer access to a a spectrum of private market investments, leveraging all implementation routes from global General Partners (GPs) through primary or secondaries, co-investment opportunities and direct sourcing.
Scottish Widows says it will focus on dynamic investment opportunities with minimal liquid exposure to help maximise the full benefits of private markets. In addition it will leverage Lloyds Banking Group’s expertise across UK-based private markets opportunities, including private equity, social housing and private credit.
Scottish Widows will operate separate growth and credit LTAFs to better align risk and return throughout the retirement journey in our workplace pensions.
Scottish Widows says it is important to deliver diversification private market assets within these structures. To this end Aberdeen will source core exposures in private equity, infrastructure and UK venture capital assets using its global network of more than 400 general partners (GPs). This will be complimented by the fund manager’s direct capability in real estate and private credit.
BNP Paribas Asset Management will source and originate diversified private credit assets from within the wider BNP Paribas Group and externally from its wide network of GPs.
Scottish Widows is a founding signatory of the Mansion House Compact, announced by the Government in 2023. This voluntary agreement saw a number of pension providers pledge to invest up to 5 per cent of scheme assets into private markets. Although there has been no limit set on UK investment to date, the government hopes this will support investment into private equity to support domestic economic growth.
Scottish Widows CEO Chira Barua says: “Private assets can be an attractive component of a modern portfolio structure for helping our customers achieve good outcomes in retirement.
‘It’s also a brilliant win-win as it supports economic growth by providing funding to companies with bespoke financing requirements. As one of the UK’s largest workplace pension providers and part of a group whose core purpose is helping Britain prosper, this is an important building block in our endeavour to offer the most distinctive pension proposition in the UK.”
Scottish Widows chief investment officer Kevin Doran adds: “Our open-architecture implementation approach gives us full control and future-proofing on how and where we invest within our LTAF.
“The opportunity to source unique investment opportunities from across the Lloyds Banking Group estate only adds to the offering, meaning our policyholders will be able to see their investments at work within their local communities.
“With full control of our own sponsored vehicle, we have the visibility of cash flows from members’ contributions, right through to asset flows. This limits the need for precautionary liquidity, making sure our members get the full benefit of their investments in private assets.”
Jeremy Soutter, managing director, Carne Group adds: “This is a huge step change in how a broader investor base can potentially access private markets. Carne is proud to support this shift towards the democratisation of private markets and working with leading providers like Scottish Widows in bringing these innovative products to market.”
