Commercial consolidator Clara Pensions has said that it will look to take advantage of its position as a pension fund when determining its investment strategy, setting it apart from insurers.

The superfund, which estimates an overall pipeline of 60 pension schemes totalling £14bn in liabilities, said that while it will be investing in similar assets to insurers, it will be able to take advantage of a slightly shorter investment timeline while facing less constraints over how it can invest the schemes money.

As things stand, superfunds will be set to operate as a pension scheme under the eye of The Pensions Regulator, while insurers, subject to different regulation such Solvency II, must deal with constraints over the matching adjustment variable.

Clara CEO, Adam Saron, said: “There has been a lot of talk about consolidators trying to somehow replace insurers, which I don’t think is accurate at all, so the future success and happiness of them is important to us.

“At the same time you don’t want them to be the same thing, you want them to attract different pools of capital and very subtitle on the investment side it is helpful that consolidators and insurers look to different investment pools, because otherwise everybody is buying the same assets and you are just driving up the price of buyouts.”

Clara will act as a bridge to buyout for pension schemes, meaning that their timeline is not as long as those looking to run out their liabilities in full, which it believes to be a strength of its model.

The fund is said to be targeting £5bn of liabilities over the next five years, but it believes this number could be surpassed once the first deals get done.

“We are targeting buyouts, so our model has an objective external benchmark against buyout, it’s moving benchmark, just like the FTSE and another benchmarks you set, but it’s very clear by our model when we have got there and when we haven’t … you want to try and outperform the benchmark a little bit, you would tend to do things that are similar but not the same,” Saron added.

He said that it amounts to “asset arbitrage in a positive and transparent way”, as it will be able to invest in a similar assets to the insurers but without the “same constraints of the matching adjustments”.

As a pension scheme, the trustees will be responsible for investing the scheme's assets.

KPMG director of pensions insurance, Tom Seecharan, commented: “From what we have seen so far, which includes the projected investment strategy from the big superfunds, the overall return they will be looking for and risk they will be running is similar to an insurer and less risky than pension schemes.

"They are both trying to do the same thing … so you would expect the kind of assets they are looking for will be similar, from a broader view you would expect to see similar investment strategies but … they [superfunds] should have a freer hand.

“It [matching adjustments] does reduce risk, but it makes things more expensive and this is one of the ways which a superfund has an advantage over an insurer, which allows it to be cheaper but also safe.”

The regulator is yet to give the green light on a regulatory framework supporting superfunds, currently delaying the first transactions from taking place.

Saron said: “This is going to be the way of the future for us for quite a while, so we need to have a good relationship with the regulator, so we need to work with them."

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