Senior investment sector figures have urged the government to amend the Pension Schemes Bill to include investment companies.

The Association of Investment Companies (AIC) is leading the call for the bill amendment, backed by House of Lords members, Ros Altmann and Sharon Bowles, the Investment Association (IA), and other industry professionals.

Under the current draft of the bill, pension schemes would not be able to meet any future requirements to invest in private assets by using investment companies.

Investment companies manage more than £100bn of asset across sectors including infrastructure, property, renewable energy generation, private companies, and startup businesses.

“Excluding investment companies from the Pension Schemes Bill simply does not make sense,” said AIC chief executive, Richard Stone.

“The bill gives the government powers to mandate pension schemes to invest in certain types of assets.

“Let’s say these powers were used in future: pension schemes would be barred from using a fund structure which has been thoroughly road-tested as a way of accessing these assets.”

Altmann described listed investment companies as an ideal way for pension schemes to invest in illiquid long-term assets.

“They have proven expertise in putting together diversified portfolios of expertly managed assets, which investors can buy to gain exposure to the exact assets which government wants pension funds to support,” she continued.

“Therefore, it seems irrational for the government to deny pension funds the choice of using closed-ended investment trusts or REITs, if they want to meet their Mansion House Accord targets.”

Bowles argued that, if the justification for investment companies’ exclusion was that they simply reallocate capital from one investor to another, then the same could be said when inflows are netted off against outflows in an LTAF.

Meanwhile, IA director of policy, strategy & innovation, Jonathan Lipkin, said that private markets were playing an increasingly important role in the capital market ecosystem, as well as supporting UK economic growth and infrastructure funding.

“As the government considers its reserve powers, it is important that the Pension Schemes Bill does not exclude investment companies,” he added.

“The focus must be on the assets where capital is allocated, not the choice of investment structure used to access them.”

Aberdeen Investments called for a product-neutral approach for policy and regulation, and one that understood some vehicles would work better for different investors.

“We are delighted to see the IA join the AIC, Baronesses Bowles and Altmann, and the broader investment company sector in publicly calling for a focus on the assets – rather than the structure,” commented Aberdeen Investments head of closed-end funds and managing director, corporate finance, Christian Pittard.

“It is so important that the industry speaks with one voice on this issue. Excluding investment trusts from the Pension Schemes Bill is also contrary to the Productive Finance Working Group’s agreed position that investment trusts and LTAFs should operate as parallel routes to long-term illiquid assets.

“Investment trusts are proven vehicles for channelling long-term capital into productive assets. They invest in infrastructure, housing, digital connectivity, clean energy and the logistics backbone that underpins the UK economy.

“Investment trusts are particularly well-suited to holding illiquid assets as they can address both permanent capital allocation and a secondary market for daily liquidity.

“But what this debate ultimately signals that, as an industry, we have more to do to broaden the understanding the real economy impact of these important vehicles.”

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