It’s a good week to be thinking about illiquids. Many of us are beavering away providing evidence (for and against) , the Government’s plans to increase DC pension schemes exposure to illiquids. Nigel Wilson has just published CMIT’s “Capital Markets of Tomorrow” report and the market is reeling from Guy Opperman’s attention that the LTAF is a busted flush at last week’s Pension PlayPen Coffee Morning.
If you want to acquaint yourself with the nuts and boults of DC illiquid investing, reserve 10.30 am on Tuesday in your diaries.
Pension PlayPen Blurb
Andre Kerr, XPS d will tell us why they have launched an “Illiquid” platform.
In August 2024 XPS announced the launch of XPS Xchange, an innovative service designed to transform the sale of illiquid assets. With the secondary market for trading illiquid assets having grown from £6bn to £100bn per annum over the last 20 years; they see an opportunity.
Their XPS Xchange, is designed to facilitate illiquid asset trade on the secondary market and adopts a three-pillar approach, enabling trustees to search for buyers and sellers across brokers, secondary fund managers and other buyers, a departure from the traditional approach of solely using brokers.
Trustees who implement this innovative approach can expect to potentially increase the value realised from illiquid asset transactions by up to 20% and make savings on transaction costs exceeding £500,000 on a typical £100 million trade.
🔵 So how does it work?
🟣 What are the targets for this?
🔵 What are the trading parameters?
Andre Kerr is a Partner in the XPS Investment team and is responsible for leading XPS’s illiquid realisation offering. XPS Group is a leading FTSE 250 pensions and insurance consulting and administration business, ………….. it says here.
As a beloved reader,you can access the event for nothing with this link.
The pitch
With the secondary market for trading illiquid assets having grown from £6bn to £100bn per annum over the last 20 years, according to Setter Capital Volume Report FY 2023, ”XPS Xchange is a departure from the traditional method of solely using a broker to find the best price”, the firm stated.
Instead, XPS Xchange scans the breadth of the market and banking solutions for buyers and sellers, enabling a wider search so trustees can achieve optimum outcomes in line with their objectives on governance, value and timescales, it added.
As a result, by accessing this wider pool of buyers and sellers,
“XPS Xchange can deliver better outcomes for clients wanting to trade illiquid assets, potentially increasing the value realised from a transaction by up to 20%”,
the firm noted.
Furthermore, XPS claims that through its expertise in institutional investing, XPS Xchange will minimise third-party fees, often resulting in savings on broker fees exceeding £500,000 on a typical £100m trade.
André Kerr, partner at XPS Group, said:
“The illiquid asset market has grown exponentially over the last 20 years, but traditional transaction methods have often left clients with limited options. XPS Xchange was developed to improve outcomes around governance, value and timings.”
He said the new approach provides buyers and sellers with the
“widest possible range of options, empowering them to make informed decisions and achieve the best possible outcomes”.
Competition
The move follows the firm’s launch of an illiquid solution for small and medium-sized defined contribution (DC) pension schemes in May in response to the UK’s Mansion House reforms, which encourage pension schemes to increase investment in productive finance.
The UK industry has seen similar services and products being launched by other consultancies and asset managers over the past few months to cater to several institutional investors intending to incorporate illiquid assets into their portfolios.
Isio also launched in May a platform enabling investors to sell illiquid assets “more efficiently”, a move driven by demand from pension schemes to sell illiquid assets.
Isio Fund Liquidity Options (i-FLO) has been driven by the “significant” demand the consultancy has seen from UK pension schemes to sell illiquid assets, combined with the difficulties sellers face doing so in a timely manner and at a good price.
A survey conducted by the Defined Contribution Investment Forum (DCIF) showed that UK DC schemes, especially master trusts and large single-employer pension funds, are increasingly interested in accessing illiquid assets via Long-Term Asset Funds (LTAFs).
Most recently, Fidelity International received regulatory approval from the Financial Conduct Authority (FCA) to launch its first LTAF to provide investors with access to a globally diversified range of public and private asset classes.
