Up to £200bn of DC assets could be committed to private debt investments by the end of the decade, according to the latest analysis from Hymans Robertson, as it warns a shift in mindset is required to meet this goal. Its Illiquid Investment: Embracing the Opportunities paper published today, proposes that private debt has a role to play in all stages of a DC glidepath.

The leading pensions and financial services firm found there is scope to introduce material allocations to illiquids assets more generally and radically improve the retirement outcomes for millions of savers.

The paper examines the wide variety of types of private debt investments and considers how the asset class can be used to diversify growth phase portfolios and reduce risk to-and-through retirement. The findings also examine existing examples of private debt in DC schemes and discuss how barriers to managing liquidity can be overcome.

Commenting on the findings in the paper, Oliver Hook, DC Investment Consultant at Hymans Robertson, says:

“We are on the brink of a sea-change in the DC investment landscape. We have seen the UK government begin to encourage investment from pension schemes into private markets through initiatives such as the Patient Capital review, the introduction of LTAFs, and now the Mansion House Compact. The barriers are gradually being broken down and our ambition is that parity will be achieved between DB and DC with regards to accessing private markets.

“We believe that private debt has a role to play throughout DC glidepaths thanks to its heterogeneity, diversification benefits, and stable income streams. It is our view that private debt and other illiquid assets will improve outcomes for DC members and we continue to push for further evolution from the industry in this area.”

The paper Illiquid Investment: Embracing the Opportunities can be read here.