Brief: The UK’s Defined Benefit (DB) pension schemes are at their healthiest since before the onset of Covid-19, as of Q3 2021, according to Legal & General Investment Management (LGIM). LGIM's DB Health Tracker, a monitor of the current health of UK DB pension schemes, found that the average1 DB scheme can expect to fund 98.3 per cent of accrued pension benefits as of 30 September 2021. This is a rise of 0.1 percentage points from the figure of 98.2 per cent recorded three months before on 30 June 2021. The health of the UK’s DB pension schemes had been gradually improving since March 2020, when it had dropped as low as 91.4 per cent as a result of the immediate impact of the pandemic on financial markets. However, while these figures suggest that the health of UK DB schemes has been improving since the initial spread of Covid-19, it is important to note that these figures may yet still understate the negative impact of the pandemic, due to weakening covenants from pension scheme sponsors, which many schemes have endured.
Brief: Private equity funds are a major contributor in the rapid growth of the private credit market, according to global law firm Dechert. In its 2021 private equity outlook, the law firm reported that 45 percent of surveyed private equity firms have increased their use of private credit financing in buyouts over the last three years. This represents a 10 percentage point increase from last year’s survey, in which 35 percent of respondents said they had increased their use of private credit. Dechert surveyed 100 senior-level executives at private equity firms across the globe with $500 million or more in assets under management. According to the report, private credit is currently the third-largest private capital asset class after private equity and real estate. The law firm said that assets under management in private credit are projected to grow to $1.46 trillion by 2025. “People love [private credit],” Markus Bolsinger, Dechert’s private equity practice co-head, told Institutional Investor. He said that private credit also poses a strong opportunity for institutional investors chasing yields without equity risk.
Brief: DWS has held the final close of its inaugural Private Equity Solutions (PES) fund achieving USD550 million, including discretionary co-investment vehicles, which is in excess of its target and hard-cap of USD500 million and USD525 million respectively. Demonstrating significant demand for its mid-life secondaries strategy, the inaugural fund closed with a global investor base consisting of state pension plans, insurance companies, corporate institutional investors and family offices in North America, Europe and the Middle East. The fund has made a total of 12 investments, which have exhibited positive performance to date. The private equity business at DWS has focused on developing a differentiated mid-life secondaries strategy that offers a compelling risk-return profile to investors whilst allowing existing private equity sponsors to continue to back their better performing portfolio companies. Mark McDonald, Global Head of Private Equity at DWS, adds: “It is a testament to the strength of our team globally for the inaugural PES fund to be oversubscribed, and with the majority of the fundraise taking place during the current Covid-19 pandemic. We seek to deliver consistent risk-adjusted returns to our investors as we continue to build out our team and extend our reach going forward.”
Brief: As COVID-19 ripped through the world in 2020, a cluster of senior figures at Aviva Investors, the £262 billion U.K. asset manager, held a series of virtual meetings over the course of six months to discuss the other big issue looming over their portfolios: climate change. It was a bold move that dramatized a growing dispute within the US$110 trillion investment industry. Many big asset managers still routinely dismiss divestment, arguing it is better to stay invested and try to alter corporate behaviour through background conversations with companies. However, there are a growing number of large, traditional investors who are taking a tougher approach with companies over global warming, a change in attitude that could have huge ramifications for businesses around the world. Big investors including the Netherlands Stichting Pensioenfonds ABP one of the world’s largest pension funds, and Norway’s oil fund, the world’s largest sovereign wealth fund, have announced divestment plans. At the same time, some of the investors who remain as shareholders are willing to adopt more confrontational tactics — most notably, the successful campaign by an activist investor to join the board of ExxonMobil Corp.
Brief: Businesses are in limbo after a federal court halted the Biden administration’s vaccine-or-test mandate for private employers. Employers are preparing to enforce the Occupational Safety and Health Administration’s (OSHA) rule, which would require businesses with 100 or more employees to mandate COVID-19 vaccinations or weekly testing by Jan. 4. But it’s now unclear whether the requirement will survive legal challenges after the 5th U.S. Circuit Court of Appeals temporarily blocked the rule over the weekend, creating confusion among companies on how to move forward. Labor lawyers are urging businesses to continue preparing for key OSHA deadlines, given that the court’s stay, for now, is only temporary. “I think it’s prudent for employers to proceed with planning assuming that the OSHA rule, at least in some form or fashion, will be implemented pending final resolution of the various court cases,” said Michelle Strowhiro, a lawyer at McDermott Will & Emery who advises businesses on COVID-19 employment issues. While the OSHA rule requires businesses to mandate weekly testing for unvaccinated employees by January, the most important deadline is coming up soon. By Dec. 5, employers must collect employees’ proof of vaccination and provide paid leave for those getting the shot, while unvaccinated employees must begin wearing a mask.