TPT Retirement Solutions will be investing £54m from its default fund into into private equity.
For investors at the growth stage, this means that 3.5 per cent of their funds are invested in private equity. This percentage decreases as member get closer to retirement, as TPT master trust uses target date funds managed by AllianceBernstein for its default strategy.
Investment in this asset class comes after AllianceBernstein research shows that over the long-term, investment in this private equity is likely to provide higher returns than public markets.
TPT Retirement solutions says this allocation is expected to contribute an additional 3 per cent on an annual basis, above global listed small cap equities. It says for a 25-year-old member planning to retire at the age of 65, this incremental return enhancement could add a cumulative 2 per cent to returns by the end of the growth stage of these target date funds.
The allocation to private equity will be in listed private equity assets such as investment trusts and the stock of private equity investment managers. The manager says this approach provides diversification, while avoiding the high costs and illiquidity of direct private equity investments.
There will be no increase in fees or costs to members.
TPT Retirement Solutions DC director Philip Smith says: “This shows the ability of master trusts to offer greater diversification and better returns for our members. Not only will the allocation towards private equity be beneficial to members, but it can also act as valuable source of capital for growing businesses.”
Henry Smith, product manager, multi-asset solutions at AllianceBernstein adds: “Our analysis shows that investments into private markets can perform better than public markets over an investment lifecycle.
