It is predicted that up to £200bn of Defined Contribution (DC) assets might be allocated to private debt investments by the end of the decade, according to analysis by Hymans Robertson.
The analysis underscores the need for a change in perspective to achieve this goal. The firm’s paper titled “Illiquid Investment: Embracing the Opportunities,” which was published today, advocates for integrating private debt across various stages of a DC glidepath.
According to Hymans, it may be possible to include sizable amounts of illiquid assets in general, which would greatly improve retirement outcomes for many people.
The research examines the wide spectrum of private debt investments on the market and looks at how this asset class can help diversify portfolios during growth phases while lowering risks before and after retirement.
The report also looks at cases of private debt that are already present in DC plans and provides advice on how to deal with the difficulties of managing liquidity.
Hymans Robertson DC investment consultant Oliver Hook says: “We are on the brink of a sea-change in the DC investment landscape. We have seen the UK government begin to encourage investment from pension schemes into private markets through initiatives such as the Patient Capital review, the introduction of LTAFs, and now the Mansion House Compact. The barriers are gradually being broken down and our ambition is that parity will be achieved between DB and DC with regards to accessing private markets.
“We believe that private debt has a role to play throughout DC glidepaths thanks to its heterogeneity, diversification benefits, and stable income streams. It is our view that private debt and other illiquid assets will improve outcomes for DC members and we continue to push for further evolution from the industry in this area.”
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