Implementing Myners

The process of implementing the report's recommendations has really only just begun. Comment from SJ Berwin.

There are signs that UK pension funds are increasing their allocations to European private equity: new sources of investment have emerged over the past twelve months, and there are indications of more to come. That is exactly the result the Government was seeking when, in March last year, it asked Paul Myners to look into institutional investment in the UK, but – as the Government's recently published 'response' to the Review highlights – the process of implementing the report's recommendations has really only just begun.

As important as the reforms for which the Review called, was its role in raising the profile of private equity as an asset class for pension fund trustees to consider – and the suggestion that flawed decision-making processes should be re-examined. All pension funds were urged to consider private equity when making asset allocation decisions, and there is no doubt that more are now doing that. One suspects that the increased number of sources of funds for the sector is – at least in part – a result of the increased profile which the review has given the asset class.

But what of the legal and tax changes suggested by Mr Myners?

The Government – now having consulted on the subject – has confirmed that it intends to implement nearly all of the changes suggested. It will, it says, legislate to force funds to take a more activist stance, to require trustees to take decisions only if they have the expertise to do so, and it will replace the Minimum Funding Requirement – although with what is not yet clear. It will remove the 20 partner limit for limited partnerships and change the way insurance companies are taxed on investments made through tax transparent vehicles. But these changes will all take time to come through.

The pace of legal change may be slow, but generally the direction is right. Ironically, the emphasis on seeking voluntary compliance by the pension fund industry may also help to hurry things along – it is far easier to threaten to legislate if funds do not reform themselves, than to find Parliamentary time to actually change the rules. And a real impact is already being felt by those raising funds – who welcome new sources of investment at this difficult time.

SJ Berwin is a European law firm with a particular focus on private equity. The above comment is taken from the firm's weekly e-bulletin, Private Equity Comment, which provides commentary on legal and tax developments which affect the European private equity community. For comment or to subscribe to these bulletins, please email