From Artemis:
A senior director of the United States Securities and Exchange Commission (SEC) has called for main street, or retail, investors to be given greater access to private market asset classes, to enhance the return profile of their pension portfolios.
Dalia Blass, a Director of the SEC’s Division of Investment Management, discussed the importance of looking at how more retail-type investors can safely access private market asset classes, including through funds managed by hedge fund managers, to level the playing-field in terms of opportunity.
The U.S. SEC’s mission is to protect investors, so moves on private market access are unlikely to be taken lightly.
But this is now the latest discussion among regulators that could result in more capital from less sophisticated investors finding its way into asset classes such as insurance-linked securities (ILS) and reinsurance linked assets, hence of interest to us and our readers.
Blass explained in a speech last week that while access to private market investment asset classes is not entirely new for main street or retail pension savers, it is rare within the now much more prevalent defined contribution pension world.
Defined benefit pension funds have forever tapped into private market asset classes to take advantage of all the features and benefits that an asset class, such as ILS or reinsurance, can provide.
“Private investments have the potential to provide stronger returns and diversification for investors, but come with both performance and liquidity risks,” Blass explained, highlighting the advantages and disadvantages to adding private market assets to main stream investor pension portfolios.....MUCH MORE
As well as the ability to add an element of diversification and decorrelation, the addition of private market assets can help to improve the overall portfolio return across the investment cycle, given these assets often behave differently to more mainstream equities and bonds.
Defined benefit pension plans seek to make use of the “potentially advantageous returns while seeking to manage those risks,” Blass said, but she noted that the pension landscape is increasingly made up of defined contribution plans which tend to access private markets much less.
“Defined contribution plans have not, historically, provided access to private investments. As a result, Main Street investors are increasingly on the outside looking in,” Blass said.
There are, of course, numerous issues around private market investments and sophisticated alternative asset classes that make them more challenging for main street investors, not least the ability to access them....
