Partners Group has launched a private markets fund tailored to the UK defined contributions (DC) pensions industry.
The Partners Group Generations Fund, which is seeded with $20 million of capital from Partners Group itself, will provide investors with access to private equity, private debt, private infrastructure and private real estate, while simultaneously providing daily liquidity and pricing.
“Private markets asset classes have long been an important source of returns for defined benefit pension schemes, but until now UK DC pension schemes have been unable to invest in them for structural reasons,” Partners Group co-CEO André Frei said in a statement.
“Our fund was designed in consultation with DC plan sponsors who are seeking ways to improve the retirement outcomes for their DC scheme members.”
Partners Group has developed private markets offerings for the world's three largest DC markets: the US, UK and Australia.
In August 2015 the firm launched its first DC market offering focused on the US market, and followed up with a product for the Australian market earlier this year.
Partners Group partner and delegate of the board of directors Steffen Meister said in the statement that the launch of the UK fund was the “final step” in achieving the goal of launching private markets funds with daily pricing and liquidity in the three largest DC markets.
“It is also a significant step towards a more level playing field between defined benefit and defined contribution pension schemes in terms of the investment options available to them.”
According to research from McKinsey published last April, the UK is the largest DC market in Europe with an expected compound annual growth rate of 10 percent in the next five years.
The Partners Group Generations Fund is structured as a Non-UCITS Retail Scheme. Roughly 40 percent will be invested in private markets asset classes, including private equity, real estate, private equity secondaries, real estate secondaries, mezzanine and infrastructure. Around 35 percent will be allocated to a yield-seeking credit portfolio, and the remaining 25 percent will be invested in the stocks of listed private equity, infrastructure and real estate firms.
The fund is aimed at institutional DC pension schemes and is not targeting retail investors. Partners Group envisages the fund as being the “alpha engine” of a pension scheme's default fund, accounting for between 10 and 20 percent of a fund's overall allocation.
Default DC funds have a cap on their total expense ratio (TER) of 75 bps. The total fees for the Partners Group Generations Fund are capped at 225 bps, which will encompass management fee, performance fee and any expenses related to the fund. As a small proportion of the overall default fund, once the fee is averaged out by less fee-heavy investments the total portfolio will come in under the threshold, the firm said.
Partners Group, which has more than $50 billion in assets under management across private equity, real estate, infrastructure and private debt, has offered semi-liquid products since 2001. These include Partners Group Private Equity, a US fund which launched in 2009 and today manages more than $1.5 billion, according to the most recent SEC filing, offering its investors monthly subscriptions and redemptions.
“As the pensions market worldwide continues to evolve and become more sophisticated, we expect private markets firms like Partners Group will become increasingly involved in DC investment management,” Frei said.
While others in the US market have developed products suitable for retail investors – such as KKR, Blackstone and Carlyle – and Pantheon has launched a retail investors' fund in partnership with AMG, as reported by PEI, Partners Group says its latest offering is thus far the only one of its kind in the UK market.