One of the largest workplace pension providers in the UK has launched a new fund with the goal of funnelling billions of pounds into private companies.
Legal & General said its new Private Markets Access Fund would offer “private market access” for 5.2m members of defined-contribution schemes.
The fund will be substantially biased towards the UK, with up to 40 per cent of the portfolio invested domestically.
Legal & General said it aimed to deploy £500m into the Private Markets Access Fund by the end of this year and £1bn by the end of 2025.
That could see up to £400m invested into UK businesses within the next two years.
The launch is part of a long-term pivot towards private markets for the firm. Last month, it announced it would be folding its private equity arm, Legal & General Capital, into its main investment management business.
This was accompanied by a plan to accelerate its private market fund launch programme, including in areas like affordable housing, university spin-outs, and clean energy.
The group said it aimed to grow its private market assets by 77 per cent over the next four years. This announcement followed a six-month strategic review in an attempt to pivot towards a more fee-based and capital-light business model.
The average margin on a private markets fund is 0.41 per cent, compared to just 0.05 per cent for index funds that make up the majority of Legal & General’s assets under management.
The new fund is structured as a fund of funds, with a new long term asset fund, the Legal & General Private Markets LTAF, sitting alongside liquid securities, along with other funds.
Pension schemes will be able to either invest in the fund directly or through a new range of Legal & General’s Lifetime Advantage funds, which have a 100 per cent allocation to growth assets.
António Simões, group CEO of Legal & General, said: “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.
“Building on our refreshed strategy set out in June, this fund will offer defined contribution scheme savers access to high growth investment opportunities, provide innovative funding for communities, society and the real economy, and power L&G’s private markets growth ambitions.”