Willis Towers Watson targets DC pensions with plan for private equity LTAF

April 16, 2024 (Preqin News) – Willis Towers Watson (WTW) has announced plans to launch a private equity fund under the UK’s Long-Term Asset Fund (LTAF) framework.

The CG WTW Private Equity Access LTAF (CG WTW PEAL) will invest in private equity, including co-investments, and will be managed by Carne Global Fund Managers (UK), WTW said in a statement.

The open-ended fund has already received initial commitments of over £450mn ($560mn) ahead of launch, while LifeSight, WTW’s DC pensions master trust, has agreed to allocate up to 5% of its LifeSight Equity default fund into private equity via the new vehicle.

Carne Global has applied to the UK’s financial services watchdog – the FCA – for approval, which WTW says is expected to be received in the second half of 2024.

News of the fund’s launch comes as increasing numbers of individual investors seek access to private markets through open-ended – or ‘evergreen’ – funds. At the same time, policymakers are seeking to promote increased investment from DC schemes into ‘real economy assets’ that require long-term capital.

The fund is the first private capital evergreen, semi-liquid vehicle to be launched by WTW’s Private Markets Solutions Team. It comes almost a year after Schroders Capital unveiled the country’s first fund under the LTAF mechanism, which seeks to boost defined contribution (DC) pension and individual investor investment in longer-term illiquid assets. Aviva Investors and BlackRock have also introduced similar offerings in the past year.

‘Crucially, for end savers looking to grow their wealth, they will now be able to access dedicated private equity exposure through a regulated pooled fund structure, the first of its kind in the market,’ Ben Leach, Head of Private Market Solutions at WTW, said in a statement announcing the launch.

Under the FCA’s rules, LTAFs can invest in a range of alternative assets in addition to private equity, including infrastructure, real estate, and private debt. Among other features, the framework allows for increased investor protection and requires a redemption policy that aligns with the liquidity of the underlying assets.

WTW said that its LTAF will include ‘mechanisms to ensure valuation alignment to the net asset value of the underlying assets and liquidity alignment to redemption timing’, in a process that will include the use of a third-party valuer.

The LTAF regime was established after the Bank of England, HM Treasury, and the FCA in 2021 jointly recommended measures to help facilitate investment in less liquid and longer-term assets, with a focus on supporting DC pension scheme investment in a new category of open-ended fund.

Similar frameworks include the European Long-Term Investment Fund (ELTIF), conceived in 2015 to increase non-bank financing for companies investing in the real economy. A revised ELTIF mechanism entered force in January this year, aimed at increasing uptake after a relatively muted response to the initial framework.

The number of evergreen funds has doubled in the past five years, according to Preqin data, driven largely by high-net-worth-investor demand for private market investments.

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