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AIC welcomes recognition of investment companies’ role in future of defined contribution pensions

25 September 2019

AIC responds to the British Business Bank’s report.

The Association of Investment Companies (AIC) has responded to the British Business Bank’s report, ‘The Future of Defined Contribution Pensions’, which seeks better long-term outcomes for the UK’s DC pension savers by facilitating investments in venture capital and growth equity.

Ian Sayers, Chief Executive of the Association of Investment Companies (AIC), said:

“We warmly welcome this authoritative and balanced report, which is a significant step towards achieving a better long-term retirement for pension savers by increasing investment in fast-growing private companies.

“Investment companies have an important role to play in helping pension funds transform the retirements of savers, in particular younger adults, by investing in the growth companies of the future. Investment companies have a proven long-term record of investing in private equity, growth capital and venture capital.  The Business Bank has rightly recognised that investment companies are highly suitable for this purpose.

“The report also highlights some of the challenges that arise when making regular investments into illiquid assets and the need to ensure fairness amongst scheme members.  The closed-ended structure addresses many of these concerns.  The stock market provides high levels of transparency and liquidity, and ensures that the price reflects the latest information about valuations and the stage of development of the portfolio companies.  This means that investors entering or leaving the fund do so at a price set independently throughout the day.

“Given the likely growth in DC schemes (to over £1 trillion by 2029) it is critical that the foundations of this type of investment are sound.  Venture capital is not only illiquid but requires sustained investment over a long period of time. The closed-ended structure is ideal for this purpose as  it is not subject to unexpected levels of redemptions which might reduce the scope for ongoing support of the underlying businesses.

“Investment companies also have independent boards of directors to look after their shareholders’ interests, providing robust governance.  This ensures managers are held to account and are offering value for money.

“As with any new initiative, it will be important scheme members understand the benefits of investing in private companies.  The AIC offers a wide range of educational materials on venture and growth capital to help investors understand the risks and rewards and the need for a long-term approach.  We fully support the Business Bank’s report and look forward to working together to turn these aims into reality.”

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Notes

  1. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 363 members and the industry has total assets of approximately £197 billion.
  2. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.
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