Minutes of the Wholesale Distribution Steering Group – August 2021

Date of meeting: 4 August 2021
Location: This meeting took place via video/audio link


Item 1 – Standing agenda items

14 July 2021 minutes:

The group agreed the 14 July 2021 minutes, and approved their publication

Sharing information on stakeholder management

The Bank informed members that they have written to the Competition Markets Authority (CMA) to provide an update on the Wholesale Work.

Item 2 – Progress Update

Project status

Eversheds reported that this phase of work is now complete and a business case has been presented to members for consideration.

Business case summary

Eversheds provided a summary of the business case which includes a transition plan with an accelerated site rationalisation programme, operational costs for the provision of cash services and counterfactual modelling to demonstrate a utility model will maintain future resilience of the Wholesale Cash market in the UK.

There are three key areas where some members have requested further information to help inform their decision: Governance structure, cost certainty and transition risks. To address these questions, Eversheds has proposed that the clean team reconvenes during the 12 week period leading up to the October 29 decision point.

In addition, WDSG agreed that where firms were having to make assumptions to feed into their individual business cases these could be shared with the central team to check for consistency.

Glidepath summary

Eversheds noted that there is a meeting scheduled with members on 6 August to agree a work plan leading up to the October 29 decision point. A detailed timetable will be presented to funding members outlining the key activities and deliverables during this period.

Next steps/frequency of WDSG meetings moving forward

Members agreed that future WDSG meetings should be aligned with the key outputs from the 12 week programme of work once developed. This will likely move to monthly meetings rather than bi-weekly.

Item 3 – Public Update

The Bank proposed, in the interest of being open and transparent, that a public update document on the wholesale development work would be helpful post the October 29 decision point. This would outline progress made, the shape of the utility and next steps. It would also provide an opportunity to summarise the feedback from the public consultation process last year, and how this fed into the design work. A formal proposed structure will be presented to members for agreement in due course.

Item 4 – Review Action Log

Actions were reviewed and closed where applicable.

Item 5 – AOB


Committee attendees

Bank of England: Sarah John (Chair), Elisabeth Bertalanffy-Fournier, Ronan McClintock, James Best, Molly Galligan

Eversheds: Ros Kellaway, Trystan Richards, Russell Saunders, Mark McLintock

Barclays: Tim Allen

HSBC: Sue Yarham

Lloyds Banking Group: Martin Barrett

Post Office: Russell Hancock

Natwest: Richard Talbot

Santander UK: Robert White

HM Treasury: Derek Dunne

Virgin Money: Derek Walker

G4S: Mike Bowen

TRM: Mark Loveridge

Vaultex: Phil Vaughan


Nick Butt (BOE), Paul Pugh (Eversheds), Simon Walker (KPMG), Paul Van Der Knapp (G4S), Azin Roussos (HMT), Anne Jessopp (TRM), Kevin McMullan (Danske), Julie Fitzgibbon (BOI), John Garrett (AIB)


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Foreign Currency Reserves 2021 – Market Notice 14 September 2021

As part of the monetary policy framework introduced by the Chancellor of the Exchequer in 1997, the Bank of England holds its own foreign exchange reserves. These reserves are separate from the Government’s own foreign exchange reserves, which the Bank manages as the Treasury’s agent.

In December 2006 the Bank of England announced that these reserves will be financed by issuing medium-term securities on an annual basis. Going forward the Bank of England will diversify the sources of this funding to also include short-term securitiesfootnote [1]. The purpose of this is to provide greater flexibility, while also broadening the range of official institution assets to support balance sheet management practices. The Notes will be marketed and distributed via a dealer panel of banks.

Investors will be able to purchase notes from the dealer panel via Bloomberg and Reuters (or by telephone). The panel includes Barclays Bank PLC, Bank of America Europe DAC, Citigroup Global Markets Limited, ING Bank N.V. and UBS AG London Branch. The tenor of the Notes shall be not less than one day or more than 364 days from and including the date of issue, to (but excluding) the maturity date.

This market notice is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from registration. The Bank of England does not intend to register the Notes under the securities laws of the United States or conduct a public offering of the Notes in the United States.

No application will be made at any time to list the Notes on any stock exchange. A communication of an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000, as amended (the “FSMA”)) received in connection with the issue or sale of any Notes will only be made in circumstances in which Section 21(1) of the FSMA does not apply to the Bank of England.

Prospective investors are referred to the information memorandum relating to the Notes (the “Information Memorandum”), which is available on request from any of the banks on the dealer panel. No investment activity or investment decision relating to the Notes should be undertaken on the basis of or relying upon any information other than that contained in the Information Memorandum.

Please direct any questions on Bank of England foreign currency reserves and their financing to the Bank’s Press Office on + 44 (0)20 3461 4411 or, alternatively, email press@bankofengland.co.uk.


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Martin Pluves appointed to Financial Market Infrastructure Board

News release

The Governor of the Bank of England, Andrew Bailey, has appointed Martin Pluves as an external member of the Financial Market Infrastructure (FMI) Board.

The FMI Board is a decision-making executive committee of the Bank of England, reporting to the Governor, and which exercises the Bank’s powers in relation to the three main types of financial market infrastructure (FMI) overseen by the Bank – recognised payment systems, central securities depositories and central counterparties.

The Boards remit includes the promotion of the safety and soundness of FMIs and the taking of specific regulatory, policy and risk decisions. The Board plays a vital role in oversight of the Bank’s financial market infrastructure policy and supervision and helps ensure the Bank meets its financial stability objective.

The Board is chaired by the Deputy Governor for Financial Stability, Sir Jon Cunliffe. In addition to senior executives from across the Bank, including the Executive Director for FMI, the Board includes three external members appointed by the Governor. Martin joins existing external members Julia Black and Elisabeth Stheeman.

Martin was previously CEO at LCH Ltd and CEO of the Fixed Income, Currencies and Commodities (FICC) Markets Standards Board.

Deputy Governor for Financial Stability and Chair of Financial Market Infrastructure Board Sir Jon Cunliffe said:

“Martin will prove to be an excellent addition to the FMI Board and will bring a huge amount of expertise on the financial market infrastructure sector, technology and management.”


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Statistical Notice 2021/06 | Bank of England

OSA to BEEDS Migration

While reporting requirements remain unchanged for the OSCA to BEEDS migration, as a result of implementing the new taxonomy there are some key reporting points to note and it is imperative that Statistical Reporters refer to the Release Note. As the taxonomy is now final and the BEEDS design work is complete, the FAQ document has been updated and addresses a number of questions raised at the previous seminar.

Following the previous OSCA to BEEDS Project Overview sessions held over the summer, we invite Statistical reporters to a further, more technical session where we will cover the following:

  • How to interpret the documents published alongside the Taxonomy
  • Key changes compared to OSCA reporting
  • Timeline
  • On boarding plan
  • BEEDS demonstration
  • FAQ’s

These sessions are scheduled for Monday 11 October at 11:00am and Thursday 14 October at 10:00am. The two sessions will cover the same material and individuals should attend one session only.

Please email any questions you may have and confirm your attendance by emailing OSCAQueries@bankofengland.co.uk Invitation links will be circulated accordingly prior to the event.

We will shortly contact all Firms via a Statistical Notice to begin collating on boarding information. We will require one name for the Principal User, Additional Users along with email addresses and mobile telephone numbers. We will at the same time, request the Firm LEI.

Further information can be found in the BEEDS User Guide.


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Huw Pill appointed Chief Economist of the Bank of England

News release

The Court of the Bank of England has appointed Huw Pill as Chief Economist and Executive Director for Monetary Analysis. Huw will also become a member of the Monetary Policy Committee.

Huw joins the Bank of England from Harvard Business School, where he has been senior lecturer since 2018. He had previously been Chief European Economist at Goldman Sachs, prior to which he held a series of senior posts at the European Central Bank. Huw has previously worked for the Bank as an economist (1990-1992).

Huw will report to the Deputy Governor for Monetary Policy, Ben Broadbent. He will start his role at the Bank of England on 6 September.

Ben Broadbent, Deputy Governor, said: “I am delighted about the appointment of Huw Pill as the Bank’s new Chief Economist. His breadth of experience across monetary policy, economic research and financial markets will be invaluable to the Bank and the MPC.”

Andrew Bailey, Governor, said: “Huw will make a major contribution to monetary policy – and to the broader work of the Bank. I greatly look forward to working with him.”

Huw Pill said: “It is a great privilege to rejoin the Bank and have the opportunity to contribute to the work of the MPC and the Bank more broadly at what remains a challenging time for monetary policy and central banking.”

Notes for editors

1. This role was advertised internally and externally. The Bank of England also engaged an executive search firm (Audeliss) to support this process. Candidates were interviewed by a panel consisting of Ben Broadbent, Deputy Governor Monetary Policy, Dave Ramsden, Deputy Governor Markets & Banking, Colette Bowe, Financial Policy Committee Member and Jane Cathrall, Executive Director People & Culture. Shortlisted candidates were then interviewed by the Governor, Andrew Bailey, and Ben Broadbent before the final selection was submitted to the Bank’s Court for approval.

2. The appointment of Chief Economist and Executive Director is made by the Court of the Bank of England. In accordance with Section 13(3)(a) of the Bank of England Act 1998, the Governor consulted the Chancellor of the Exchequer on the appointment of the new Chief Economist to the MPC.

3. CV for Huw Pill


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Minutes of the Productive Finance Working Group – 28 July 2021


1. Competition law reminder by Simmons & Simmons LLP

2. Discussion of the recommendations in the draft Productive Finance Working Group report

3. Next steps


Item 1 – Competition law reminder by Simmons & Simmons LLP

Simmons & Simmons LLP set out the legal obligations of all members of the Working Group relating to competition law.footnote [1] They reminded members that it is their responsibility to meet their legal obligations and to take their own legal advice.

Item 2 – Discussion of the recommendations in the draft Productive Finance Working Group report

Andrew Bailey welcomed the meeting participants and set the objectives for the meeting – to discuss the key messages and recommendations developed by the Technical Expert Group (TEG) in the draft Productive Finance Working Group report and agree next steps.

The Steering Committee (SC) chairsfootnote [2] reiterated the importance of the Group’s work to facilitate greater investment in long-term, less liquid assets and the benefits this would bring for pension savers and the wider economy. They thanked members of the SC and the TEG for the excellent progress they have made and support they have given in writing the draft report and developing the recommendations contained in it.

The recommendations had been grouped into four buckets: focus on long-term value for DC pension scheme members; building scale in the DC market; a new approach to liquidity management; and widening access to less liquid assets to a broader set of investors.

SC members supported all of the recommendations and discussed them, in turn.

Focus on long-term value for DC pension scheme members

As the DC pension industry has grown, and as most pension savers do not manage their own investments, it has sought to ensure that costs are low. This was necessary against a backdrop of legacy products that had relatively high cost without necessarily generating sufficient value for members. However, as the industry matures, an excessive focus on cost alone could become a missed opportunity to secure long-term value for members in the future.

There was general agreement that shifting the focus away from cost to long-term value for members was crucial to support investment in a broader range of assets, but such a shift would require concerted action by all key stakeholders.

Pension schemes are expected to focus on member outcomes in carrying out their fiduciary duty. Some members, therefore, thought that there was a greater onus on the Group and the industry, more generally, to make a positive case to schemes that investing in less liquid assets may be in their members’ interests and that the risks can be managed (see below). It was important to recognise, however, that: such investments/some less liquid assets may not be appropriate for all schemes; and the broader economic benefits of such investments were of secondary importance to schemes. The Pensions and Lifetime Savings Association, the Association of British Insurers, theCityUK and the Investment Association (IA) agreed to develop the case for schemes to invest in less liquid assets.

Some members felt that the focus on cost alone was so entrenched, that greater regulatory action was required to facilitate more investment in less liquid assets. One suggestion was a requirement that pension schemes should actively consider such investments and, if they choose not to, explain why. However, there was no consensus on this, as other members thought that it should not be the role of Government or regulators to direct investments in particular asset classes and were concerned that this would further increase the administrative burden on pension schemes.

There was a range of views on how and what changes to performance fees might help. The Group welcomed the Department for Work and Pensions (DWP)’s recent reforms to introduce smoothing into the Charge Cap. However, some members thought that this did not go far enough and favoured excluding performance fees from the cap where they are associated with greater long-term value for members. This would give schemes more scope to invest in less liquid assets without breaching the cap. Leaving the Charge Cap aside, one member expressed scepticism about the value and necessity of such fees at all and thought the solution was for asset managers, consultants and DC schemes to work together to develop innovative and flexible methodologies for performance fees that are better suited to DC schemes. There was no consensus on either of these proposals, but the SC agreed to continue to develop recommendations on them with the aim of gaining greater support. Simmons & Simmons offered to work with others on performance fee methodologies.

Several members also said that Trustees should put greater focus on optimising expected future net risk-adjusted returns for members and monitor long-term returns, rather than focussing on those over the next year or two, which is currently often the case.

Several members highlighted the important role of consultants, who advise Trustees in their investment allocations, in shifting the focus to long-term value. Willis Towers Watson indicated that they would be happy to take forward the recommendations relating to consultants.

Building scale in the DC market

The DC market is characterised by a long tail of small schemes. This makes longer-term investments harder, because smaller schemes do not have the bargaining power to negotiate appropriate fees when investing in less liquid assets or the capacity and expertise to make complex investment decisions. As a result, a meaningful, diversified allocation to less liquid assets is only currently possible for a small number of the largest UK DC schemes.

There was broad support for the two main recommended ways to overcome the scale barrier. The first is for DC schemes to consolidate, which the DWP is already driving and the Group supports. In particular, an assessment of a scheme’s ability to deliver value and access a diversified range of asset classes at its current scale should be a key factor in its consideration of whether to consolidate. The second is to make less liquid investments more accessible to smaller schemes. A wider range of fund structures can support pooling of multiple assets into a single fund vehicle. The Long-Term Asset Fund (LTAF) will be important in supporting this.

Some members noted that consolidation is only a route to better member outcomes if it is associated with improved governance and greater long-term value for members.

A new approach to liquidity management

Greater investment in less liquid assets increases the importance of robust liquidity management, given that many of these assets cannot be bought and sold on a daily basis. A broader range of DC schemes can find approaches that enable them to invest in less liquid assets as part of a diversified portfolio, while also meeting liquidity needs of DC scheme members.

Alongside support for Trustees managing liquidity at the DC scheme level, they would also need a range of products that provide access to less liquid investments. In addition to existing opportunities, the Group has further developed the key elements of the LTAF, which is specifically designed for investment in less liquid assets, and requires aligning redemption policy of the fund with liquidity of its assets.

To facilitate appropriate liquidity management and give Trustees greater confidence in investing in less liquid assets, there was broad support for industry and trade bodies to develop guidance on good practice on liquidity management at a fund level, in collaboration with the FCA and the Bank of England. This guidance should focus on appropriate ranges for dealing frequency and notice periods for the different asset types for the LTAF.

Given the industry’s current reliance on daily dealing, a mindset shift was required. It was vital that the new liquidity toolkit was transparent, flexible, effective in bad times, as well as good, and investors had full confidence in and understanding of them. Some members also asked the regulators to play a bigger role in helping industry develop and regulate the tools, including putting them into the broader context of their work on liquidity management for the open-ended funds.

The IA, BVCA and abrdn agreed to work with other stakeholders to develop this liquidity toolkit and guidance.

Widening access to less liquid assets to a broader set of investors

There are a range of ways to invest in less liquid assets, all of which play important roles in meeting the needs of different investor groups. To facilitate the distribution of less liquid assets, including the LTAF, to a broader range of investors including DC schemes and retail, when appropriate, there was broad support for the FCA to consult on changing their rules for investment in less liquid assets through unit-linked funds and review their rules for distribution to appropriate retail clients, respectively. Nikhil Rathi confirmed that the FCA would take these forward to consultation.

Several members thought that it was important to signal the following in the report:

  1. in principle, a well-diversified portfolio, which includes less liquid assets, may be appropriate for a wide range of investors;
  2. in an environment of low interest rates, which may encourage a search for yield, the LTAF could offer a safe way of achieving that; and
  3. the direction of travel should be to make the LTAF available to a broader set of investors, including retail, as long as the appropriate protections are in place.

One member said that the LTAF should not be made available to retail investors at this stage. It should only be considered for retail distribution after it had demonstrated that it was safe in the institutional market in both good and bad market conditions.

One member noted that under current tax rules, investor monies that are sheltered in Individual Saving Accounts would be unable to be invested in LTAFs. However, consideration of tax incentives is not in scope of the Working Group’s objectives, so the Group has not made a recommendations on this.

Item 3 – Next steps

Members were asked to provide further comments on the report and recommendations and expressions of interest to take forward the latter by Friday 6 August. The Secretariat would work with the Technical Expert Group to incorporate these into the final report to be published in September.

The Secretariat would also get in touch with organisations, who agree to take forward the recommendations, to kick off the process of implementing them.

There was widespread agreement that the SC should monitor progress in implementing the recommendations and meet again in early 2022 to do that.


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Minutes of the Productive Finance Working Group – 16 July 2021

Date of meeting: 16 July 2021 | Virtual meeting


1. Competition law reminder

2. Chairs’ opening remarks

3. Discussion of the draft executive summary of the report

4. Discussion of the draft recommendations of the report

5. Next steps and closing remarks


Item 1 – competition law reminder

1. One of the co-chairsfootnote [1] reminded members of the Working Group of their legal obligations relating to competition law.footnote [2] They reminded members that it is their responsibility to meet their legal obligations and to take their own legal advice.

Item 2 – chairs’ opening remarks

2. The TEG co-Chairs thanked members for their work to date and set the objectives for the meeting: in particular, to discuss the draft executive summary and recommendations of the report ahead of the Steering Committee’s meeting on 28 July.

Item 3 – draft executive summary

3. One of the co-chairs gave an overview of the executive summary and opened for comments and questions.

4. Comments included:

  • Reframing the narrative to set out the case for investment in less liquid assets,
  • Reframing the narrative so that it puts the benefits for pension scheme members’ interests first, before setting out the benefits for the broader economy,
  • Reframing the summary around some key themes, which could also apply to the grouping of the recommendations,
  • Highlighting that there are other products that can provide access to less liquid assets, not just the LTAF,
  • Bringing out the need for a collaborative approach between different parts of the industry in order to overcome the barriers that have been identified,
  • Whether a regulatory nudge should feature in the executive summary, given that it is not a recommendation,
  • A need to be clear on next steps following the publication of the report, as well as a general consistency between what is in the executive summary and the recommendations.

5. One of the co-chairs asked for any further comments on the executive summary to be shared in writing.

Agenda item 4 – draft recommendations

6. One of the co-chairs gave an overview of the recommendations and opened for comments and questions.

7. Comments included:

  • There was broad support for the recommendations.
  • DWP confirmed that they were broadly happy with the recommendations the group intends to make to them.
  • TPR confirmed that they were broadly happy with the recommendations the group intends to make to them.
  • The FCA confirmed that they were broadly happy with the recommendations the group intends to make to them. Reordering the recommendations with the more important at the top, and adding some context to each one, so that the recommendations can be read as a standalone section.
  • The potential for dropping or consolidating some of the recommendations.
  • Rewording the recommendation on performance fees to ensure it appropriately reflects the balance of input that is being requested from industry and regulators.
  • Rewording the recommendation on industry guidance so that it is clear this is referring to maturity profile of assets rather than the mechanics of liquidity management.
  • Rewording one of the recommendations on the classification of investment costs and administration costs to make it clearer that this is in relation to regulatory treatment of those costs.
  • A range of views were expressed relating to the ISA eligibility of the LTAF. Tax is outside the scope of the Working Group’s objectives, so it was agreed a recommendation on this would not be included.

Item 5 – next steps and closing remarks

8. The co-chairs set out the next steps on the report, including how comments would be incorporated into a draft of the report to be discussed by the SC at its meeting on 28 July.

9. One of the members of the Secretariat talked through a timeline of next steps.


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Minutes of the Productive Finance Working Group – 22 June 2021


1. Competition law reminder by Simmons & Simmons LLP

2. Chairs’ opening remarks

3. Stress testing exercise

4. Key questions for discussion

5. Next steps and closing remarks


Item 1 – competition law reminder by Simmons & Simmons LLP

1. Simmons & Simmons LLP set out the legal obligations of all members of the Working Group relating to competition law.footnote [1] They reminded members that it is their responsibility to meet their legal obligations and to take their own legal advice.

Item 2 – chairs’ opening remarks

2. The TEG co-chairsfootnote [2] thanked members for their work to date and set the objectives for the meeting: in particular, to discuss the results of the stress testing exercise, to discuss some key questions that have arisen, and to give an overview of next steps, including in relation to the final report.

Item 3 – stress testing exercise

3. The chair of the second sub-groupfootnote [3] gave an overview of the stress-testing exercise, explaining that the intention was to build on the Group’s previous external engagement and get a better understanding of the operational barriers DC schemes face in investing in less liquid assets. Engagement was with people from all the way across the process, including consultants, compliance, operations and investment. The Group had had detailed conversations with five DC schemes and one pensions platform. The following points were noted:

  • There are operational barriers, for example in relation to portfolio rebalancing and liquidity management, but they can be overcome.
  • Exposure to an LTAF will likely be wrapped through a fund of funds structure or through a platform, not through direct exposure.
  • Liquidity isn’t seen as a big barrier as schemes are expecting to manage it at scheme level.
  • A bigger issue is the ability to price the units of the LTAF daily to strike the overall default fund daily price. Options are to use a stale price or for it to be indexed. Some trustees called for more guidance on this point.
  • Teams will need to be upskilled, which will have cost implications.
  • Most schemes want to use a commitment model (where the asset manager calls on investors for cash when the next investment is available) rather than a fund model (where investors are able to subscribe for and redeem fund units at regular intervals).
  • There will be some asset allocation drift (where the proportions of investment in certain asset classes are impacted due to market movements), which may take time for trustees to get used to.
  • Uncertainty about whether there might be a further reduction in the DC charge cap was raised by several schemes as an impediment to them investing in less liquid assets. Therefore, a commitment from the DWP not to change the cap for a period could be helpful.

4. The chair of the third sub-groupfootnote [4] spoke about the demand-side issues raised in the stress testing exercise. Four themes had emerged:

a) Cost – there is significant pricing pressure in this part of the market. The charge cap applies on a bundled charge for both investment and administration, which is having a negative impact on the investment budget. If there is a possibility of DWP splitting these out (into separate charges) this would allow for a better allocation of budget toward investments then is currently possible under the bundled approach.

b) Regulations – mixed messages from the regulators makes it difficult for trustees to consider this in a clear way. A regulatory nudge could be helpful.

c) Positioning – it’s very difficult to increase costs to members. Some help with regulatory or broader positioning would be helpful. One scheme also said using something like a value type matrix or framework might be helpful.

d) Perception – all were aware of the value these assets could bring. However, they suggested that trustees would be more comfortable making such investments if DWP, TPR and the FCA were clearer that considering these investments is an appropriate thing to do.

5. The chair of the first sub-groupfootnote [5] gave an overview of how the different examples of LTAFs that were used during the stress testing exercise were received, noting:

  • Lifespan and lock-ups – feedback was that this is acceptable. Potential investors also appeared comfortable with the proposed use of notice periods by LTAFs.
  • Valuation frequency –despite asset managers’ preferences for quarterly most schemes thought the more frequent the better.
  • Commitment/fund dealing – if the LTAF was illiquid a commitment model would be acceptable, if it could look after liquidity then a fund model would be acceptable.
  • Fee methodology – due consideration needs to be given to performance fees, in particular whether operating an LTAF with performance fees might be off-putting to certain DC schemes due to concerns with either breaching the charge cap, or the impact on their charges more generally which might render them uncompetitive.

6. Questions and discussion followed the presentations, including in relation to: the features of the LTAF, as proposed in the FCA’s consultation; the pros and cons of recommending regulatory nudges, around which there was no consensus; bundling of investment and administration charges in the charge cap; and clarity and consistency of regulatory messaging around investment in less liquid assets.

Agenda item 4 – key questions for discussion

7. Nicholas Smith (AIMA) gave a presentation on possible recommendations for industry and regulators to overcome the demand-side barriers to investing in less liquid assets. Recommendations included:

a) Fees – finding an alternative way to regulate performance fees outside the charge cap, which may also act as a stimulus for fee innovation by industry. It was noted that the TEG would need to consider DWP’s proposals to smooth performance fees but it was unclear whether this alone would be sufficient to remove this barrier.

b) Creating the right environment – regulators have a key role to play, as they create the culture. Schemes and their trustees see ‘don’t walk on the grass’ signs around illiquid investment, and a mixture of standards and views across the regulators isn’t helpful. Updating the TPR code of practice, guidance from industry and regulators, and enhanced transparency around longer-term measures of performance and value (e.g. risk-adjusted measures) could be helpful in addressing this.

8. Stephen O’Neill (Nest) gave a presentation on what trustees or pension scheme managers need to think about if they are considering investing in less liquid assets. The presentation covered three topics:

a) Illiquidity risk and capacity – how asset allocations and the risk return profile get distorted through market movements, and how trustees can establish a comfort level with a number of assets that won’t move in price when the rest of the portfolio does. This included by being able to tolerate some flexibility in the asset allocations in the near term.

b) Investment beliefs – how schemes can use their SIP regarding which markets they might want to invest into and asking trustees to look at their foundational beliefs to steer them in that direction. This included by re-engaging trustees on their objectives for the scheme and highlighting how an allocation to private markets might help to accomplish those objectives.

c) How might trustees make an allocation, test the market, find an illustrative price and then going back to the market to deploy a live allocation based on the cost constraint.

9. Ross Hayter (abrdn) – introduced two questions for discussion:

a) Can and should the TEG initiate some industry guidance to support the FCA’s consultation on the LTAF? If so, what kind of guidance could be produced, for example, on liquidity management and notice periods?

b) What are the key barriers for the LTAF being distributed beyond DC investors and what protections should we consider in order to supplement the CP?

10. Questions and discussion followed the presentations, including in relation to: if the LTAF should be opened up for broader retail distribution (some were for and some were against); the difficulties posed by the NMPI rules; the need to shift the focus from cost to long-term value for DC scheme members; performance fees and performance fee smoothing; regulatory messaging; the role of investment companies in illiquid investment; and industry guidance on liquidity management.

Item 5 – next steps and closing remarks

11. One of the chairs set out the next steps on the report, including the plan to engage with the TEG as we start to draft the report. The plan was to share a draft of the report with the SC ahead of its meeting on 28 July.

12. One of the members of the Secretariat talked through a timeline of next steps.


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