Private market investments become accessible via a new DC offering launched by Legal & General
Legal & General Launches Private Markets Access Fund for Defined Contribution Members
Legal & General (L&G) has announced the launch of the L&G Private Markets Access Fund, providing its 5.2 million defined contribution (DC) members with access to private markets, including investments in the energy transition.
The new fund, which will deploy up to £1bn by the end of 2025, will leverage L&G's £48bn private markets platform to offer investments in areas such as clean energy, affordable housing, university spinouts, and critical infrastructure. The fund will be available for direct investment by DC schemes and through the newly launched L&G Lifetime Advantage Fund default strategies.
Rita Butler-Jones, head of DC at L&G, emphasized the member-centric approach of the fund, stating, "Our members are at the core of what we do, and we believe providing millions of savers with exposure to the potential returns available through global stock market today will support the delivery of better long-term retirement outcomes."
The L&G Private Markets Access Fund will also give DC members access to the L&G NTR Clean Power (Europe) Fund, an Article 9 compliant fund which invests in clean energy in Europe. This fund, which has an IRR target of 7-8 and comes with fees ranging from 0.5% to 1.25%, is expected to account for up to 40% of the portfolio.
António Simões, Group CEO of L&G, emphasized the economic growth impact of the fund, stating, "Today's launch is an important step forward in putting UK pension capital to work to drive economic growth while supporting people to build the savings they need for retirement."
L&G's initiative comes a month after the group announced the integration of its private equity division, Legal & General Capital, into its main investment management business, Legal & General Investment Management. This move is aimed at streamlining the group's operations and enhancing its ability to deliver long-term value to its clients.
It is worth noting that both Aegon and L&G are signatories of the Mansion House Compact, a pledge by British master trusts to include a 5% allocation to stock market today in their default fund range. Additionally, L&G has a net zero by 2050 target in place, and across its proprietary investment portfolio, the group aims to halve its carbon footprint by the end of the decade.
Historically, DC investors in the UK were restricted by a charge cap of 0.75%, but since April 2023, trustees are able to exclude performance-related fees from this cap. This change is expected to encourage more DC schemes to invest in stock market today.
The new fund will make use of the newly introduced Long-Term Asset Fund (LTAF) structure, which is designed to provide a regulatory framework for investments in illiquid assets, such as private markets. This structure is expected to help L&G manage the risks associated with these investments and provide more certainty for its DC members.
In conclusion, the launch of the L&G Private Markets Access Fund represents a significant step forward in providing DC members with access to private markets and the potential returns they offer. This move is aligned with L&G's commitment to long-term value creation, sustainability, and member-centricity.
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