This week’s House of Lords debate on the Pension Schemes Bill, discussing Amendment 46A from the noble Baroness Lady Bowles of Berkhamsted, supported by Baroness Ros Altmann, was met with resistance by the Government.
The motion was tabled to pave the way for investment trust and REIT inclusion as eligible wrappers for meeting the allocation thresholds for ‘qualifying assets’ envisioned by the Mansion House Accord. While Baroness Bowles received broad support from the house, it was countered by a suggestion that investment trusts are ‘just buying and selling a financial asset’ and ‘does nothing to put money into the UK economy.’
Meanwhile, the Long-Term Asset Funds (LTAF), which is the semi-liquid product that has been developed to hold ‘qualifying assets’, can be used by pension schemes to gain access to these illiquid assets. Any investment trusts or REITs held would not count for the purpose of meeting any asset allocation requirements around ‘qualifying assets’ if the Government uses their reserve power or for the reserved power to be triggered in the first place.
Christian Pittard, Head of Closed-End Funds and Managing Director, Corporate Finance, at Aberdeen Investments, said:
“We applaud Baroness Bowles and Baroness Altmann for their continued efforts in highlighting the key role investment trusts play in the UK economy, channeling patient capital into innovative, long-term productive assets.
“It is an irony that a sector which literally invented collective investing over one hundred and fifty years ago, and which financed the American railway boom, has been dismissed as ‘just a financial asset.’
“Far from being “just shares”, data from the Association of Investment Companies shows that investment trusts currently have over £30bn invested into infrastructure assets alone in the UK.
“Investment trusts are proven vehicles for channeling long‑term capital into productive assets. They invest in infrastructure, housing, digital connectivity, clean energy and the logistics backbone that underpins the UK economy. A good example is Tritax Big Box REIT, which invests in and delivers critical logistics real estate across the UK, with 49 million square ft of logistics under management. These are precisely the types of investments the UK economy urgently needs more of.
“The debate also revived a myth that investment trusts do not bring new capital into the economy once they list. In normal market conditions, most of the capital raised by investment companies comes through follow‑on issuance, not IPOs. According to London Stock Exchange data for the decade to 2023, investment companies raised £25bn in IPOs and an even more substantial £59bn in follow‑on capital.
“Excluding investment trusts 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 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.”
