Scottish Widows is set to launch an open-architecture Long Term Asset Fund (LTAF) later this year, pending regulatory approval. This initiative is part of its ongoing commitment to providing innovative investment solutions for its customers.
The open-architecture LTAF, sponsored by Scottish Widows and operated by an appointed full-scope Alternative Investment Fund Manager (AIFM), comes with greater control, flexibility, consistency of governance and valuation methodology. This operational simplicity offers advantages compared to investing in a range of LTAF sub-funds under different asset manager umbrellas and will serve to future-proof the offering. Key features include:
- Access to a spectrum of private market investments, leveraging all implementation routes from global General Partners (GPs) through primary or secondaries, co-investment opportunities and direct sourcing.
- A targeted focus on dynamic investment opportunities with minimal liquid exposure to help us maximise the full benefits of private markets.
- Leveraging parent company Lloyds Banking Group’s expertise across UK-based private markets opportunities, including private equity, social housing and private credit.
- Separate growth and credit LTAFs to better align risk and return throughout the retirement journey in our workplace pensions.
After a rigorous selection process, Scottish Widows has appointed strategic partners to deliver the LTAF. To support the open-architecture structure, Carne will serve as the Alternative Investment Fund Manager (AIFM), with Aberdeen Investments and BNP Paribas Asset Management selected as the initial managers of growth and credit sub-funds respectively.
Diversification of investment management capability in private markets is paramount to deliver good investment outcomes. Aberdeen will source core exposures in private equity, infrastructure and UK venture capital assets using its global network of more than 400 GPs. This will be complimented by the fund manager’s direct capability in real estate and private credit. BNP Paribas Asset Management will source and originate diversified private credit assets from within the wider BNP Paribas Group and externally from its wide network of GPs.
As a founding signatory of the Mansion House Compact, announced by the Government in 2023, Scottish Widows is dedicated to encouraging investment in private assets, including private equity to support economic growth. The LTAF will offer new investment options to over four million workplace pension customers across the UK.
Chira Barua, CEO of Scottish Widows, said: “Private assets can be an attractive component of a modern portfolio structure for helping our customers achieve good outcomes in retirement. It’s also a brilliant win-win as it supports economic growth by providing funding to companies with bespoke financing requirements. As one of the UK’s largest workplace pension providers and part of a group whose core purpose is helping Britain prosper, this is an important building block in our endeavour to offer the most distinctive pension proposition in the UK.”
Kevin Doran, Chief Investment Officer of Scottish Widows, said: “Our open-architecture implementation approach gives us full control and future-proofing on how and where we invest within our LTAF. The opportunity to source unique investment opportunities from across the Lloyds Banking Group estate only adds to the offering, meaning our policyholders will be able to see their investments at work within their local communities.
“With full control of our own sponsored vehicle, we have the visibility of cash flows from members’ contributions, right through to asset flows. This limits the need for precautionary liquidity, making sure our members get the full benefit of their investments in private assets.”
Jeremy Soutter, Managing Director, Carne Group, said: “This is a huge step change in how a broader investor base can potentially access private markets. Carne is proud to support this shift towards the democratisation of private markets and working with leading providers like Scottish Widows in bringing these innovative products to market.”
Xavier Meyer, CEO, Aberdeen Investments said: “Scottish Widows’ LTAF is a meaningful step towards the democratisation of private assets. We are proud of being part of this initiative, and grateful of the trust that Scottish Widows has placed into our long-standing private market expertise.”
Sandro Pierri, CEO of BNP Paribas Asset Management said: “We are delighted to be selected by Scottish Widows to design and structure a bespoke solution that aims to offer members diversification, lower volatility and enhanced returns via integrating several in-house private credit asset classes with embedded ESG benefits.”
