AIMA supported the development of the guide to ensure that it reflects the interests of DC pension scheme members and aligns with sound market practices. AIMA was represented on the PFWG by Jack Inglis, CEO, and on the PFWG Technical Expert Group by Nicholas Smith, Managing Director, Private Credit.

Value for money:

To help shift the focus from minimising cost to a more holistic value assessment, this guide outlines a process for assessing value for members from investing in less liquid assets and provides case studies on how that could work in practice for different types of DC schemes. This guide informs trustees and DC decision makers of the main considerations when evaluating less liquid assets including the case for improved returns, adherence to broader sustainability goals, risk profile and governance considerations when investing in these assets.

Performance fees:

Performance fees and similar arrangements are a common feature in many less-liquid fund products. This guide focuses on how properly structured fees can reflect the specific requirements of DC schemes and investor interests.  Key considerations explored by the guide include ensuring fees are linked to added value, distributed fairly, and implementing these within a DC context. The guide also explains common features of performance fees and how decision makers should consider these when investing in less liquid assets.

Liquidity management:

Investment into less liquid assets necessitates robust liquidity management as many of the assets cannot be bought and sold daily. This guide details how DC scheme decision makers can align the liquidity requirements of their investors with the structure of the fund.  The guide also describes individual liquidity management tools and how they fit within investor needs.

Fund structures when investing in less liquid assets:

DC pension schemes can access less liquid assets through several fund structures. This guide provides an understanding of the routes to access less liquid assets so they can make informed decisions on which options might be suitable for their investors.

Legal guide to the Long-Term Asset Fund (LTAF):

There are several features and legal considerations that DC schemes should consider when investing through the Long Term Asset Fund (LTAF).  This guide provides an overview of the key parties involved in managing the fund, the required legal documentation, investment borrowing powers, and the relevant rules relating to investment in a unit-linked or ‘wrapped’ LTAF by default DC pension schemes. The guide also provides an extensive list and description of relevant terms relating to the LTAF.

The PFWG has also been producing model constitutional documents for the LTAF, beginning with the version for an ICVC which can be found here. The other versions, for an ACS and AUT, are currently being finalised and will be published soon.The PFWG has also been producing model constitutional documents for the LTAF, beginning with the version for an ICVC which can be found here. The other versions, for an ACS and AUT, are currently being finalised and will be published soon.

Due diligence considerations:

Performing due diligence is a crucial step for DC pension schemes investing in less liquid assets. This guide provides an overview of the key considerations for Trustees and DC decision makers when evaluating the asset managers investing in less liquid assets including governance and culture, assessing knowledge, skills and expertise, investment process and approach towards ESG considerations.

The PFWG is made up of a diverse set of market participants, including but not limited to banks, asset management firms, pension funds and insurance companies, corporates, infrastructure firms, wealth managers, investment platforms and trade associations representing relevant sectors and markets. The PFWG is co-sponsored by:

• Andrew Griffith MP, the Economic Secretary to the Treasury;
• Andrew Bailey, Governor of the Bank; and
• Nikhil Rathi, Chief Executive of the FCA