Concerns raised over limit on illiquid investments

UK corporate pension funds are now concerned that the Pension Regulator’s recently revealed plans to cap illiquid investments to just 20% of portfolios could potentially force them to change their currently adopted strategies.

In March this year, the Regulator made a proposal that illiquid assets should not be allowed to comprise more than a fifth of a portfolio. This proposition marked a serious departure from the present regulations in place, which say that investments should be held “predominantly” in assets being traded on established regulated markets.

The rules currently in force are interpreted to state that pension funds must not invest more than 50% illiquid assets instead of the 20% now being proposed.

With the new change now proposed under its all-new code of practice, designed to be introduced tin order to replace 10 of the existing codes created for pension administration and governance, the Pensions Regulator wants public and corporate pension fund trustees and executives to make certain they are diligent in their management of any potential liquidity risk, along with exposure to assets considered illiquid. With the comment period for the proposal now passed, pension funds are waiting for the UK’s Pension Regulator to release a list of any changes.

If enforced, the proposal would mean a portion of pension funds would need to reduce illiquid investments and monitor allocations regularly to ensure the new limit is not exceeded.

UK investors looking for portfolio and investment advice around Shropshire, Cheshire and other parts of the country can rely on wealth managers for guidance.


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