08Jun

U.K. investors question 20% illiquids cap proposal

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Corporate pension funds are concerned that the U.K. regulator’s plan to limit illiquid investments to 20% of portfolios could force them to alter their current strategies.

The Pensions Regulator proposed in March that illiquid assets should not make up more than 20% of portfolios — a big departure from current regulations that state investments should “predominantly” be held in assets traded on regulated markets.

The current rules are interpreted to mean that pension funds should not invest more than 50% in illiquid assets rather than 20%, Tiffany Tsang, London-based head of DB, LGPS and investment at the Pensions and Lifetime Savings Association, said in a telephone interview.

With the change proposed under its new code of practice, which will be introduced to replace 10 existing codes for pension governance and administration, the regulator wants corporate and public pension fund executives and trustees to ensure they carefully manage liquidity risk and exposure to illiquid assets. The comment period on the proposal ended May 26 and pension funds are now waiting on the regulator to reveal any changes, sources said.

 

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