BoE publishes “Productive Finance” statement

The Bank of England (BoE) has published a statement on the progress of the Working Group on Productive Finance (the Working Group) which was set up in November 2020 by BoE, HM Treasury and FCA.

The statement provides a summary of matters covered at the Working Group’s first meeting in January which included:

  • discussion of the importance of broadening the range of productive finance assets UK investors have access to;
  • agreement to prioritise the development of the Long Term Asset Fund (LTAF); and
  • identifying  a number of barriers to investment in longer-term and less liquid assets more widely, particularly for Defined Contribution pension schemes.

The Working Group met for a second time last week and discussed:

  • the work done to develop the LTAF;
  • the analysis undertaken to understand and begin to address operational barriers to investing in long-term assets; and
  • possible initiatives to support pension schemes in keeping costs low while at the same time securing overall long-term value for their members.

The publication on the 7th May of FCA’s consultation on the LTAF was the first concrete step. FCA’s proposal for the LTAF will be an open-ended authorised fund that can invest in assets such as venture capital, private equity, private debt, real estate and infrastructure.

The next phase of the Working Group will be focussed on developing the other concrete steps that market participants and the public sector can take to remove barriers to finance supporting investment in less liquid assets. It will set out its proposed solutions and timelines later this year.

Duncan Scott