Private Markets Profile caught up with Anna Rule to discuss the main talking points of the Pensions UK Investment Conference
The debate over how far government should go in directing pension capital dominated discussions at the largest annual investment conference for the pensions industry last week.
For Anna Rule, director of private markets and real assets investments at Railpen, the issue is not whether pension funds should invest in UK growth assets — but whether the conditions exist to make those investments stack up.
Rule oversees around £10bn in private market investments at the £34bn railways pension scheme, with responsibility spanning infrastructure, property and other illiquid assets. Speaking to Private Markets Profile, she discussed fiduciary duty, the outlook for private credit and why improving the UK’s investment environment matters more than mandating allocations.
A major theme at the conference was the Government’s strong push for pension capital to support UK productive assets. However, as this is private sector money, is the government overstepping the mark?
Anna Rule: The Government is right to highlight the role long-term institutional capital can play in supporting productive investment and growth. UK pension schemes are natural investors in infrastructure, innovation and other long-term assets.
However, it is important to remember that pension assets are private funds held on behalf of members and beneficiaries. Trustees have a fiduciary duty to invest in the best financial interests of those members.
Where productive UK investment meets those return and risk requirements, pension funds can be active participants. The key is focusing on improving the UK as an attractive place for UK pension funds to invest in, by creating a stable pipeline of investible opportunities and removing barriers to investment.
These barriers include challenges with planning permissions on property, connectivity delays to the National Grid for infrastructure projects, and scale-up opportunities for growing UK businesses, among others. Over a third (£14bn) of the scheme’s AuM is invested in the UK across a diverse range of asset classes.
Discuss opportunities in the defence and security sector at PMP’s summit next Wednesday.
What role should the Government take in supporting institutional investors’ fiduciary duty?
Rule: Long-term savers need a stable policy, economic and fiscal environment for confidence in the UK financial system.
Do you expect large DB schemes to continue building internal investment capabilities, or will outsourcing remain the dominant model?
Rule: I believe we’re likely to see a hybrid model persist. Large DB schemes have been steadily building internal capability, particularly in areas like private markets, infrastructure and portfolio construction, because scale allows them to do that efficiently and maintain closer control of strategy and outcomes.
But outsourcing will remain important – particularly for specialist mandates, access to niche strategies and where external managers have clear expertise or advantages. The real shift is not insourcing versus outsourcing – but becoming more selective about deep expertise and where each adds the most value.
Institutional Investment Conferences & Summits from Longview Networks
Private credit has frequently been in the news in recent months, with stories of potential problems emanating from the US. What is your outlook for the asset class?
Rule: Railpen’s exposure to private credit is minimal. There are signs of stress emerging in parts of the private credit market, but it’s important to distinguish between cyclical pressures and structural problems. Rising interest rates and slower growth are beginning to test some highly leveraged borrowers. The market is large and highly fragmented, and outcomes will depend heavily on underwriting quality and manager discipline.
What were your biggest takeaways from the conference? What single investment issue should DB trustees be paying the closest attention to over the next 12 months?
Rule: This year’s conference highlighted a strategic pivot toward rapid implementation of reforms, consolidation into ‘megafunds,’ and increased investment in UK domestic growth assets.
Key other themes included navigating market volatility through stronger governance and dynamic asset allocation, refining ESG approaches amid a shifting political and regulatory backdrop, and the continued and growing debate around the potential use of DB surpluses.
There was also a clear emphasis on scale, internal capability and the role of long-term institutional capital in financing infrastructure and innovation – provided opportunities meet trustees’ fiduciary and risk-return requirements.