Almost three-quarters, around 69 per cent, of UK defined contribution (DC) pension schemes plan to access private markets via LTAFs, according to research from Schroders and Longview Networks.
The research found that 74 per cent of respondents expect to increase private market allocations for growth-phase strategies, while 59 per cent anticipate boosting exposure for retirement-phase portfolios.
Meanwhile, around 53 per cent increased their private equity allocation at their most recent investment review, and risk-adjusted returns were cited as the most significant drivers of private market investment decisions.
Additionally, a quarter of DC schemes are also expecting to significantly increase their UK private markets exposure, with 25-49 per cent of their total private markets allocation invested in domestic private markets solutions.
According to the UK’s Mansion House Accord, signatory schemes plan to allocate at least 5 per cent to UK private markets by 2030, meaning that their overall allocation to private markets will be significantly above the 10 per cent level set by the Accord.
Around 40 per cent of respondents said they had increased their exposure to UK infrastructure at their most recent review, with 35 per cent boosting their allocations to private debt. The majority of respondents, around 82 per cent, described renewable infrastructure as the most attractive net zero investment opportunity.
DC schemes are increasingly interested in boosting their UK exposure, but most do not see further consolidation as the answer. More than a third, or 38 per cent, say they already have sufficient scale, while another 34 per cent believe the barriers to investment lie elsewhere.
According to the research, the biggest challenge is a lack of investable opportunities, with 68 per cent of respondents citing this as the main constraint on investing in UK private markets.
Nearly three years after Schroders launched the UK’s first LTAF, Climate+, the findings highlight growing momentum behind the vehicle, as DC schemes adapt investment strategies amid regulatory reform and a sharper focus on long-term member outcomes.
Schroders head of UK DC clients Ryan Taylor says: “The DC landscape is changing rapidly, and the Pension Scheme Bill and Mansion House Accord will reshape the investment landscape. Our inaugural DC Investment Survey looks at these seismic shifts driving the industry and shaping DC investment.
“The biggest winner would appear to be LTAFs with nearly three in four DC schemes planning to structure their private market investments through the investment vehicle. At the same time, more than a quarter plan UK private market allocations significantly above those encouraged by the Mansion House Accord, suggesting growing momentum behind this investment trend.”