Daily policy initiatives by governments across the world who are desperate to avoid the worst ravages of an economic recession are fuelling a lot of the volatility in public markets with which investors are now sadly familiar. However, many pension funds have significant private market exposures through alternative investments. Those holdings are not immune to government intervention and pension funds should note the sometimes unexpected effect of policy changes.

The Pensions Regulator’s COVID 19 guidance on 27 March advised pension scheme trustees to “Review and manage specific risks which may now exist within their portfolios …eg concentrations of risk and/or exposures to deteriorating sectors/credits”.

This blog provides further detail on some emerging investment risks.

Private Equity (PE) Funds: Eligibility Criteria for Government Liquidity Packages in the UK and US

The Government’s financial support package here in the UK includes the Coronavirus Business Interruption Loan Scheme (CBILS).This is targeted at small and medium-sized enterprises (SMEs). One of the eligibility criteria for businesses wishing to benefit from this scheme is that their annual turnover does not exceed £45 million. The scheme is being administered by the state-owned British Business Bank, with accredited lenders mandated to provide the loans. As matters stand, accredited lenders are interpreting “business” to equate to a consolidated group for accounting purposes. Consequently, where PE houses hold majority ownership stakes in portfolio companies, the same approach is being applied – meaning that the annual turnover test is measured against the aggregate revenue of all such portfolio companies.

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