Legal & General opens DC offering to private market investments
Legal & General (L&G) has unveiled the L&G Private Markets Access Fund, offering its 5.2m defined contribution (DC) members access to private markets including investments in the energy transition
Legal & General (L&G), one the largest workplace pension providers in the UK has unveiled the L&G Private Markets Access Fund, offering its 5.2m defined contribution (DC) members access to private markets including investments in the energy transition.
The new fund will employ L&G’s £48bn private markets platform to offer investments in areas such as clean energy, affordable housing, university spinouts, and critical infrastructure. It will have a significant bias towards the UK with up to 40% of the portfolio invested in the UK. L&G plans to deploy up to £1bn by the end of 2025.
It will give L&G’s DC members among others access to the L&G NTR Clean Power (Europe) Fund, an Article 9 compliant fund which invests in clean energy in Europe, focussing in particular on onshore wind, battery storage and solar. The fund has an IRR target of 7-8 and comes with fees ranging from 0.5% to 1.25%.
Historically, DC investors in the UK were restricted by a charge cap of 0.75%, which has made them more cautious to invest in private markets. This restriction has been put in place in order to ensure that scheme members, who often have very small retirement savings pots are getting the best value for their money. However, since April 2023, trustees are able to exclude performance-related fees from this cap, giving them more flexibility to allocate to private market assets.
The announcement comes a week after another DC provider, Aegon announced the inclusion of private market assets as part of its DC default offering. Both Aegon and L&G are signatories of the Mansion House Compact, a pledge by British master trusts to include a 5% allocation to private markets in their default fund range.
Like Aegon, L&G will make use of the newly introduced Long-Term Asset Fund (LTAF) structure. L&G new offering is structured as a Fund of Fund, with an investment in a new private markets Long Term Asset Fund (LTAF), the Legal & General Private Markets LTAF, sitting alongside exposure to liquid securities, as well as L&G and third party funds. The fund will include a range of private market assets, including private equity, real estate, private credit, and infrastructure.
The new fund will be available for direct investment by DC schemes and through the newly launched L&G Lifetime Advantage Fund default strategies. The Lifetime Advantage Funds, designed to adapt as members' needs evolve, will allocate 100% to growth assets, including a significant portion to private markets, in the early stages of members' savings journeys.
António Simões, Group CEO of L&G, highlighted the broader economic impact of the fund: "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."
Rita Butler-Jones, head of DC at L&G, emphasised the member-centric approach of the fund: "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 private markets will support the delivery of better long-term retirement outcomes.".
L&G's initiative comes a month after the group announced that it intends to integrate its private equity division, Legal & General Capital into its main investment management business, Legal & General Investment Management.
L&G has a net zero by 2050 target in place. Across its propierary investment portfolio, the group aims to half its carbon footprint by the end of the decade.
