What if your pension pot is invested in private equity?

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The truth is most of us have no way of answering this question. We have no idea what our pension pots are invested in and it might surprise you to know that many of the default managed by master trusts such as NEST and BlueSky have sophisticated investment strategies that already include investments into the kind of high-risk illiquid investments that the British Business Bank has been calling for.

If you get to page 8 of BlueSky’s Chairman’s Governance Statement 2018 you can read this

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Which begs the question – “what are the venture capitalists moaning about?”. BlueSky does not have a particularly high profile among master trusts and it does not trumpet itself as market leading. It has just got on with the job of diversifying its default fund in exactly the way suggested by the BBB without any fuss and without troubling the charge cap.

It should be remembered that BlueSky and its sister master trust Crystal were among the first to be authorised by the Pensions Regulator and would undoubtedly have submitted the investment strategy of its target date funds to the Regulator’s scrutiny.


What is all the fuss about?

Trustees of master trusts don’t have to hang about for rulings on whether Private Equity Funds fit into their charging structures, they just get on with using them. It would seem that all the fuss and bother created by the BBB is simply to allow venture capitalists to make more money from these funds than they’re currently allowed to – by the Trustees and by the 0.75% cap.

If ever there was an open and shut case not to ease the cap, it is this on.

Well done firms like BlueSky for adopting diversified strategies and negotiating deals which work for the members rather than the venture capitalists.

Well done the DWP for sticking to its guns and well done the Pensions Regulator for taking a pragmatic view on what BlueSky could invest into.


Should you be worried about investing in private equity funds?

The question is whether you trust your trustees and  whether you trust the regulator . There are good and bad private equity funds and it is up to Trustees like BlueSky’s to choose wisely with the help of their investment consultants.

If you are in a BlueSky pension and you want to know more about what BlueSky are up to , read the Chair Statement and if you are still worried , contact BlueSky who will put you in touch with the Trustees.

That’s how it works.

In my view , you shouldn’t be worried but I know BlueSky, the Trustees and the Investment Consultant – and I have trust in the Pensions Regulator and its boss the DWP.

Pensions are too important to ignore – how trustees invest your money matters. In my view the transparency of the BlueSky investment reporting is a model of its kind and presents the solution to the BBBs problems.

You should not be worried to be invested in high-risk illiquid strategies as long as these are managed by people you trust. If you don’t trust your trustees – then you have a problem.

great egret flying under blue sky

 

About henry tapper

Founder of the Pension PlayPen, Director of First Actuarial, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to What if your pension pot is invested in private equity?

  1. Phil Castle says:

    Yep

  2. Eugen N says:

    There is no point for the trustees to invest in private equity. Private equity is a bad asset, high charges, illiquid, highly cyclical, high leverage, high left skew in the returns distribution.

    It is not for pensions!

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