The Association of Investment Companies (AIC) has accused the government of a contradictory approach to the UK’s £262bn listed closed-end funds sector after excluding its members from the Pension Schemes Bill.
The new bill will empower the government to force pension schemes to invest some of their portfolios in private assets, but as currently drafted would not enable them to achieve this requirement by investing in listed investment companies.
AIC chief executive Richard Stone said the exclusion of investment companies from the legislation was “unjust and unjustifiable” given they had invested over £110bn in private assets such as infrastructure, renewables, property, venture capital and private companies. This capital was vital for UK growth, he said.
“They are a tried and tested way for all investors, including pension schemes, to access these assets. There is no justification for excluding them from the range of assets pension schemes could invest in,” Stone said.
The trade body said the discrimination against investment companies was inconsistent with the government’s Financial Services Growth and Competitiveness Strategy, which chancellor Rachel Reeves unveiled in her Mansion House speech this month. The AIC said the Treasury had highlighted the “distinctive advantages of our homegrown investment companies”, while also boosting the sector with a large exemption from the requirement to publish prospectuses when raising money.
Government says one thing …
In a letter to Treasury minister Torsten Bell, Stone said: “I regret to say that this contradiction reflects a longer-term pattern where the government claims to support the sector then fails to show that support when it is making acual policy decisions.”
The AIC’s complaint comes as the sector waits to see what cost disclosure rules the Treasury and Financial Conduct Authority will devise to replace the previous discredited regulations. These made listed closed-end funds look more expensive than they really are and discouraged wealth managers from holding them. This in turn contributed to a slump that has seen the share prices of many investment companies fall to steep discounts to the value of their assets, preventing them from raising new money and provoking a wave of mergers and wind-ups in a bid to salvage shareholder returns.
