Many providers have increased exposure to overseas equities and, more recently, to private markets, according to LCP’s fifth annual Master Trusts Unpacked report, which warns trustees to manage risks and ensure that strategies protect members’ outcomes.
The report highlights a shift in how master trusts are managing their default investment strategies, showing that providers with higher allocations to US equities delivered the strongest performance in 2025. It suggests that growth phase returns for the year to 30 September 2025 ranged from around 12 per cent to 20 per cent, with an average of 14.6 per cent.
LCP warns that while higher overseas equity allocations have boosted returns, they have also increased exposure to market concentration risk, particularly in US markets, where a few large tech companies have driven a lot of the performance. Trustees are therefore encouraged to help members understand that equity markets can be volatile over shorter periods.
Meanwhile, private market investments are becoming more common, with most providers including or considering them in default funds or premium options.
According to the research, strategies vary as some providers use small allocations in the default fund while others offer alternative options with higher exposure. It notes that differences in asset allocation, glidepath design, and diversification continue to shape member outcomes, particularly as savers approach retirement.
Additionally, responsible investment is now widespread, but few trusts target measurable real world outcomes and some providers have extended it beyond equities.
The report highlights that while master trusts are evolving to improve returns, trustees must remain mindful of risks and continue guiding members through increasingly complex investment strategies.
LCP partner DC practice Edward Dixon says: “The master trust market is changing fast, and providers are adopting a wide range of different investment approaches. With so much variation, a well-thought-out investment design is crucial to securing good outcomes for members. It is important to look closely at how each strategy is constructed, what risks it introduces, and whether it will continue to deliver in different market conditions.”
