The British Private Equity & Venture Capital Association (BVCA) is lobbying against a UK government proposal that would only permit defined contribution pension schemes to invest in funds charging 0.75 percent management fees or less.
The trade group wrote to the Work and Pensions Committee arguing that “it would make it overly difficult for scheme managers of those funds to allocate capital to more resource-intensive asset classes, such as private equity.”
The letter goes on to suggest that a better way to protect defined contribution scheme investors, while allowing them freedom to invest, was to shift the emphasis in the charge cap debate from upfront costs and on to returns.
“We strongly believe that ultimately, maximizing net-of-fees returns must be the policy objective since it is this metric which will drive ultimate retirement income, decrease reliance on the state and end pensioner poverty,” the letter said.
Defined contribution schemes – where employees and employers make contributions into a scheme, but do not guarantee any particular level of benefits on retirement – are becoming an increasingly important pool of capital.
European regulators appear to recognize this and have planned to offer a pan-EU marketing passport allowing managers of European Long Term Investment Funds (ELTIFs) to target retail investors, like defined contribution plans, across Europe. The BVCA’s European counterpart, the European Private Equity & Venture Capital Association (EVCA) welcomed the EU’s proposal when it was first mooted in February.