NEW YORK--(BUSINESS WIRE)--Pantheon, a leading global private equity, infrastructure and real assets fund investor, today announced that it has introduced performance-based pricing as an option for its private equity strategies1 targeted at the defined contribution (DC) market.
“The innovative fee solution we are announcing today visibly aligns investors’ interests with Pantheon’s, addresses core plan sponsor concerns, including costs and potential litigation2, and it demonstrates the confidence we have in our ability to deliver strong returns to our investors,” said Kevin Albert, Managing Director at Pantheon.
The U.S. retirement market consists of both defined benefit (DB) and DC plans, and more than 90 million U.S. citizens are covered by DC plans, with DC assets in excess of $6.7 trillion3. Historically, DB plans have outperformed DC plans for reasons that include a shift toward alternative assets and differing investment fee structures4. Based on the strong returns the private equity asset class has delivered in recent years5, Pantheon believes that private equity strategies have the potential to address the performance delta between DB and DC plans and merit consideration as a viable investment option by plan sponsors.
“We believe it is essential to take action to close the performance gap between DB and DC plans. Research shows that 52% of American households are currently at risk of not having enough to maintain their living standards during retirement6. Retirees can ill afford to suffer continued underperformance in their DC plans,” commented Kevin Albert. “Our view is that private equity has an important role to play in addressing performance. Our efforts to date in the DC market focused on tackling structural considerations for liquidity and valuation; now is the time to further innovate with fee options.”
Pantheon’s Performance Pricing Fee Overview
The performance pricing option applies only to that portion of a portfolio actually invested in private equity investments (e.g., not including cash and liquid securities)7. A performance-based fee is only accrued when the performance of the private assets in the portfolio beats its benchmark, which is the S&P 500.
Pantheon does not receive all the performance fee it accrued immediately. When a performance fee is accrued, it is gradually paid to Pantheon over at least eight calendar quarters. This is so there can be a reservoir available to reverse performance fee accruals in scenarios of underperformance. Because Pantheon’s strategy intends to accommodate periodic trading, and the fee accrued would be reflected in the strategy NAV8 as of the relevant period, investors will not pay for performance they did not experience.
“This pricing innovation shows the confidence we have in our ability to generate incremental returns with private equity for 401(k) participants. This is why we are putting our money where our mouth is: If we perform, both investors and Pantheon benefit. If we don’t perform, we both share in that underperformance,” Kevin Albert continued.
Pantheon also announced that it is working with a number of General Partners, including KKR, to seek to manage the less predictable and irregular investor capital inflows that can be expected in a DC plan, and to facilitate efficient deployment.
“The need for expedited capital deployment presents some potential challenges. Our objective is to facilitate efficient GP capital deployment to reduce potential cash drag, and address the more irregular capital flows typically experienced by a DC plan,” said Kevin Albert.
Notes to Editors
PANTHEON
Pantheon is a leading global private equity, infrastructure and real assets fund investor that invests on behalf of over 415 individual institutional investors, including public and private pension plans, insurance companies, endowments and foundations. Founded 35 years ago, Pantheon has developed an established reputation in primary and secondary private asset solutions across all stages and geographies. Our investment solutions include customized separate account programs, regional primary fund programs, secondaries, co-investment and infrastructure programs. Pantheon has 35 years’ experience of investing in private markets, and has offered Private Equity solutions for the U.S. DC market since 2014.
As at September 30th, 2016 Pantheon had $35.2 billion assets under management* and we currently have 223 employees located across our offices in London, San Francisco, New York, Hong Kong, Seoul** and Bogotá**. Our employees include 71 investment professionals.
Pantheon is majority-owned by Affiliated Managers Group Inc (“AMG”), alongside senior members of the Pantheon team. AMG is a NYSE-listed global asset management company with equity investments in leading boutique investment management firms. The ownership structure, with Pantheon management owning a meaningful share of the equity in the business, provides a framework for long-term succession and enables Pantheon management to continue to direct the firm’s day-to-day operations.
* This figure includes assets subject to discretionary or non-discretionary management, advice or those limited to a reporting function.
** Please note that PV US’s Bogota office is a representative office and a PV US Korean subsidiary has opened the office in Seoul. These offices do not provide investment advisory services.
This press release is not an offer of securities for sale in the United States. Securities may not be offered or sold in the United States absent registration or an exemption from registration.
For more information, go to www.pantheon.com.
Notes
1 Private equity strategies refers to the illiquid private assets investments, including but not limited to, private equity, infrastructure, real assets and credit.
2 Cerulli Associates, “The Cerulli Report: US Retirement Markets 2016- Preparing for a New Post-Conflict of Interest Rule”, December 2016; Callan Associates, Callan Survey: “Spotlight on Fees is Reshaping Defined Contribution Plans”, January 2017
3 Vanguard, “How America Saves 2016, Vanguard defined contribution plan data”, June 2016
4 Towers Watson, “Defined Benefit Plans Outperformed Defined Contribution Plans Again”, May 2013; Cliffwater LLC, “An Examination of State Pension Performance: 2006 to 2015”, September 2016
5 American Investment Council, “Public Pension Fund Analysis", October 2016; Cliffwater LLC, “An Examination of State Pension Performance: 2006 to 2015” , September 2016
6 The Center for Retirement Research at Boston College, “National Retirement Risk Index”
7 Private equity strategies refers to the illiquid private assets investments, including but not limited to, private equity, infrastructure, real assets and credit.
8 Strategy NAV is defined as the value of the private assets portfolio.
IMPORTANT DISCLOSURE AND DISCLAIMER
This document and the information contained herein is the proprietary information of Pantheon; it may not be reproduced, provided or disclosed to others, without the prior written permission of Pantheon. Pantheon is comprised of operating entities principally based in San Francisco, New York, London and Hong Kong. Pantheon Ventures Inc. and Pantheon Ventures (US) LP are registered as investment advisers with the U.S. Securities and Exchange Commission. Pantheon Ventures (UK) LLP is authorised and regulated by the Financial Conduct Authority (FCA) in the United Kingdom. Pantheon Ventures (HK) LLP, an affiliate of Pantheon Ventures (US) LP, is regulated by the Securities and Futures Commission in Hong Kong.
This document and the information contained herein is issued by Pantheon Ventures (US) LP. This document and the information contained herein is directed only at persons in the United States of America. No other person should access this document and the information it contains, or act or rely upon it.
Nothing in this document constitutes an offer or solicitation to invest in a fund or strategy managed or advised by Pantheon Ventures (US) LP or recommendation to purchase any security or service. The information has been provided for information purposes as a general market commentary only and does not constitute any form of legal, tax, securities or investment advice. It does not take into account the financial objectives, situation or needs of any persons, which are necessary considerations before making any investment decision. The general opinions and information expressed herein should not be acted or relied upon by any person without obtaining specific and relevant legal, tax, securities or investment advice. Pantheon Ventures (US) LP does not undertake to update this information, and the information and views discussed may change without notice. Legal, accounting and tax restrictions, transaction costs and changes to any assumptions may significantly affect the economics and results of any transaction or investment. Investment involves risks. Please refer to the Fund’s offering documents for details including the risk factors. In general, alternative investments such as private equity or infrastructure, real assets, and other private asset funds involve a high degree of risk, including potential loss of principal invested. These investments can be highly illiquid (a private equity holding cannot be purchased or sold as quickly as shares of listed stock in order to invest participant contributions or meet participant requests for withdrawals or transfers. The ability to make daily deposits into the Fund is not guaranteed.), charge higher fees than other investments, and typically do not grow at an even rate of return and may decline in value. These investments are not subject to the same regulatory requirements as registered investment products. In addition, In addition, the Fund may invest in exchange traded funds (“ETFs”) that are designed to track U.S. large cap equity indices, such as the S&P 500 Index. The ETFs may utilize leverage. Such investments may from time to time involve a hedging strategy in order to seek to protect the value of the ETFs through the use of equity options or other hedging instruments. Where applicable, investors should be aware that due to the illiquid nature of private equity it may be difficult to make withdrawals from the Fund that exceed a significant percentage of the investor’s investment at any one time, in which case restrictions may be imposed on the amounts that can be withdrawn in order to better manage the liquidation of underlying holdings to fund the withdrawals. Investors should bear in mind that there is no guarantee that the Fund will achieve its objectives. Past performance is not necessarily indicative of future results. Future performance is not guaranteed and a loss of principal may occur. Market and exchange rate movements may cause the capital value of investments, and the income from them, to go down as well as up and the investor may not get back the amount originally invested.
Where applicable, any examples provided in this document on the performance fee model are intended for illustration purposes only to demonstrate how the Fund or performance fee will work based on hypothetical performance of the Fund against the selected benchmark. The illustrated examples are in no way a reflection of or indicative of actual future performance of the Fund against the selected benchmark. This document may also include “forward-looking statements”. All projections, illustrations, forecasts or related statements or expressions of opinion are forward-looking statements. Although Pantheon Ventures (US) LP believes that the expectations reflected in such forward-looking statements are reasonable, it can give no assurance that such expectations will prove to be correct, and such forward-looking statements should not be regarded as a guarantee, prediction or definitive statement of fact or probability.
Pantheon Ventures (US) LP has taken reasonable care to ensure that the information contained in this document is accurate at the date of publication. However, no warranty or guarantee (express or implied) is given by Pantheon Ventures (US) LP as to the accuracy of the information in this document, and to the extent permitted by applicable law, Pantheon Ventures (US) LP specifically disclaims any liability for errors, inaccuracies or omissions in this document and for any loss or damage resulting from its use.
Any reference to the title of “Partner” for persons located in the United States refers to such person’s capacity as a limited partner of Pantheon Ventures (US) LP. Copyright © Pantheon 2017. All rights reserved. PVL 7964.
