Since 2023, British governments – first blue, now red – have been encouraging, cajoling and now potentially mandating big DC pension providers to invest in private markets.
Many are already shifting default strategies, with a number of providers claiming they are on track to meet the 2030 deadline. All stress this is driven by the investment case and client interest, rather than agreed targets. Indeed some are not signatories to either the Mansion House Compact or Accord.
James Monk, investment director for FutureWise, Fidelity International’s default strategy for UK workplace schemes, says: “FutureWise has continued to evolve in order to deliver the strongest long-term outcomes for members.
“Most recently, this has included integrating private markets into the strategy for younger members through investment in Fidelity’s Diversified Private Assets LTAF early last year.”
Fidelity is building its private market exposure, with a focus on quality implementation. Monk says it is targeting a 15 per cent allocation, with a view to reaching this over a three-year period. “This will provide members with access to private equity, private credit, infrastructure, real estate via a single, globally diversified building block,” he adds.
Aegon UK, managing director of investment proposition Lorna Blyth says: “We started looking at private markets in 2023, and have been researching this space for a while.
“Our biggest default on the contract pension side has invested into three LTAFs with three different managers. We have just over £1bn sitting in the LTAFs at present and will reach our target allocation over a three to five-year period. At that point the strategy will hold about 17 per cent.” She adds that the master trust default will move into the same LTAFs from June this year.
“The move from DB to DC transferred the investment risk to the member. But they haven’t had access to the same investment universe that DB does. The LTAFs allow them to do that. There are lots of reasons to invest in private markets: it is a good diversifier for your default and can improve that risk-return profile.”
UK opportunities?
In terms of the Accord’s commitment to invest 5 per cent in the UK, Blyth says: “Our view would be that this happens voluntarily, because opportunities in the UK stack up versus opportunities elsewhere. We will have some exposure to UK. We’re monitoring how that develops and haven’t mandated targets to managers.”
She adds: “We are seeing schemes select this as their default. It is higher priced than our low-cost passive, but with the performance it has delivered and the potential to deliver, schemes are comfortable with that.”
Aviva’s embrace is significant. Maiyuresh Rajah, director of investments at Aviva, says: “We’ve got My Future, My Future Focus, and we launched My Future Vision last October. My Future Focus is the main scale default, with £35bn under management. In terms of private markets, it invests 10 per cent of the portfolio in private markets, split across direct property, infrastructure and private debt.”
But the company is looking to build on this significantly with its latest launch. “My Future Vision is pushing the boundaries. What it looks to do is invest between 20 to 25 per cent in private markets, across private equity, private debt, infrastructure and property.
“The structure is a bit different from what’s out there. We not only invest in the growth phase, but in the retirement phase as well. So, the allocation to private markets changes as a saver gets closer to retirement, and then the investments themselves change as well. So, we go heavier on private equity at the start and then move more into private credit.”
Aviva is using its in-house asset manager, Aviva Investors, but also five external managers.
Conviction approach
Standard Life’s head of investment proposition, distribution Callum Stewart says: “From a Standard Life perspective, our conviction is unwavering, with some specific propositions that are launching this year. From an industry perspective, we are really pleased to see that the momentum has gathered pace.”
He adds: “We signalled in Q3 last year, the launch of our new default strategy. It’s new in terms of its name, but it’s actually not new in terms of its construct and our thinking behind it.”
Stewart says this is effectively a mirror image of the company’s flagship default strategy, Sustainable Multi Asset, which had around £40bn AUM at the end of 2025. He says: “We want to leverage that scale and growth focus, while unlocking access to private assets. It’s a clone of
SMA with the ability to invest in private assets to a material degree. By material, we’re talking about a 20, or 25 per cent allocation eventually.”
Stewart says this default will be looking for the highest quality private market assets in the highest growth areas to maximise return potential. “We believe that we should implement this carefully, to not expose members to some significant risks they might otherwise endure in the short term. So, we will implement this in a multi- year fashion.”
Communication challenge
All providers are also carefully considering their communications strategies. Monk says: “Private asset programmes are incredibly complex and attracting headlines through the Mansion House Accord. Fidelity’s decision not to sign this was carefully considered, and it is incumbent on us to evidence how we expect to drive better outcomes for our members through a globally diversified approach.”
He adds: “It is important to remember that not all private asset opportunities will improve member outcomes as the headlines sometimes suggest. It is the importance of an experienced team and due diligence process in selecting the right opportunities that drives the better outcome. The private asset industry also has a lot of work to do in getting comfortable in sharing more case studies of how it has driven value more publicly.”
Blyth adds: “We ran educational sessions with our trustees covering the case for private markets and we’ve run those sessions with our distribution teams as well.
“We have found this is a topic of interest for the adviser firms and consultants we work with. We talk to them about the types of companies that we are investing in, typically companies supporting the move to renewables, or those in the medical life science or tech space. Most people that we speak to are excited about the types of companies that we can invest in, and, so far, feedback has been positive.”
Discussing the situation regarding providers, Mark Searle, head of DC investment at XPS says: “Master trusts and GPPs are generally making steady, but slow progress towards their Mansion House commitments. We’re still seeing a divide between those who plan to incorporate private markets into their main default and those who are adopting the two-horse model of little change to the current main default, but more significant allocations within a more expensive default.
“Alongside this, the tide seems to be turning for single employer trusts, as more are starting to invest in private market solutions as they become accustomed to the idea of illiquidity, and see master trusts taking the plunge.”
He adds: “In DC, we’re in frequent dialogue with the providers and fund managers. We’re looking for the fair application of performance fees and processes to monitor when features of private markets, such as stale pricing, are impacting member outcomes and how leaving versus remaining members are treated.”
He says that performance fees in particular continue to garner attention, in terms of how visible they are, and whether they’re applied at the total fund level, or on underlying funds. He adds: “We’re also talking to managers about the charges that don’t get routinely disclosed, as transparency is crucial. We expect much more to be done on this.”
Gallagher head of private markets, Tricia Ward says that about two-and-a-half years ago, it ran a survey of about 45 of the largest investment managers, looking at views on launching long-term asset vehicles. A third were doing so, a third said no, and a third were taking a wait-and-see approach, not wanting to be first to market.
Over the last year, she says this has now become two groups: those definitely active in this market, and those definitely not. She says that those who were maybes have largely moved to the ‘Yes’ camp.
“We’re seeing the most offerings available in relation to master trusts. They’re on life platforms. And that’s where we’re seeing managers create LTAFs. We have around 25 approved LTAFs in the market, and about nine that are undergoing approval.
“A lot are multi-strategy across the four sleeves of private markets: private equity, private credit, infrastructure and real estate. And there are a few that are dedicated to private credit. They’re the most frequently occurring vehicles that we see. The multi-strategy ones tend to have a global focus with some overweight in the UK. With Mansion House, it’s helping to tackle that investment in UK productive finance.”
She says initially the majority of these vehicles made a point of highlighting sustainability and impact objectives. Although these objectives may not have changed, there is less emphasis on this in the current climate, she says.
Some are only using internal asset managers with a smaller cohort accessing external expertise.
She adds: “We know there’s a specific target for 2030. Candidly, I think achieving that for a lot of schemes is going to be quite punchy, if you look at the pace at which capital is being allocated into this space.
“We’ve only got four years of that timeframe left and a lot of schemes are still figuring out if, how and why they should allocate to private markets. And some still haven’t got over some of the first line questions, such as what will be the fees charged on the strategies.”
