Pantheon Introduces Performance-Based Pricing for the Defined Contribution Market
Groundbreaking fee innovation designed to address plan sponsor concerns
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.
Contacts
Brunswick Group
Beatriz Garcia
Tel: +1 212 333 3810 | Email: pantheon@brunswickgroup.com
or
Pantheon
Amanda
McCrystal, Principal, Global Head of Marketing and Communications
Tel:
+1 212 205 2000 | Email: amanda.mccrystal@pantheon.com
or
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