The Pension Schemes Bill and Mansion House reforms mark a turning point for UK DC pensions, but is the drive to invest more in UK private markets matched by the potential opportunity set? The industry is mobilising behind the government’s agenda. DC allocations are shifting from 80–100% in low-cost global passive equities to 0–30% in private markets across master trusts, where the top 12 providers cover 95% of assets.
A wall of money?
How significant is this capital inflow? We assume the Master Trust market will exceed £500bn by 2030 (1) and the average allocation to private markets will be c.15%. Of this allocation, we assume 50% will be invested in the UK. That provides a run-rate of £4-4.5bn p.a. investment by 2030. If we add a similar level of UK investment from Local Government Pension Schemes (LGPS), we reach a net-new £10bn p.a. flow of capital to UK privates, or £40bn cumulatively between now and 2030.
How does that stack up against the size of UK private markets?
Overall, that is less than 3% of current UK private market investment volumes, based on industry estimates.
Though not all areas of UK private markets will be affected in the same way, in aggregate this suggests UK DC has substantial room to grow its UK private markets investment allocation.
Scoping the opportunity set
To put this in context, we’ve scoped the scale and nature of opportunities across UK private market asset classes:
▪ Private equity and venture capital
Private equity and venture capital form the growth engine of the economy, backing over 13,000 UK businesses from start-up to mature buyouts. These investments support 2.5 million UK jobs, nearly 8% of UK employment and generate around £200 billion annually, or 7% of GDP (2). The British Private Equity and Venture Capital Association (BVCA) recorded £30 billion of capital directed into UK-based businesses via private equity in 2024, across more than 2,000 deals, up 44% from the previous year.
▪ Private debt
The UK private debt market, now the largest in Europe, provides essential non-bank lending to corporations, real estate developments and infrastructure projects, originating approximately £90 billion annually (3) in various forms of debt financing. UK-based fund managers oversee $126.7 billion (£93.7 billion) in direct lending strategies alone (4).
Private debt has been one of the most significant capital market trends since the financial crisis. New regulations curbing bank risk-taking increased their cost of capital, prompting private lending funds to step in.
▪ Infrastructure
UK infrastructure represents a compelling opportunity for long-term investors, attracting major pension systems globally. The Government’s Infrastructure Pipeline identifies £530 billion of projects over the next decade, with £285 billion requiring public sector funding and the remainder seeking private capital (5).
The renewable energy transition alone demands extraordinary capital deployment. The UK Government’s Achieving Clean Power 2030 targets require £40 billion of investment annually through 2030 – £30 billion for generation and £10 billion for transmission networks. (6) With £150 billion already invested in renewable generation assets and the UK possessing the world’s largest offshore wind potential, the sector offers both scale and technological leadership (7).
So why the scepticism?
The UK’s private markets are a vast and expanding ecosystem of opportunities. Why then do we hear such scepticism about the opportunity set? Investors need to be able to access opportunities from across the entire market (open-architecture), and crucially have the fee budget to access many of these opportunities, criteria which are often not in place. Our contention is that constraints may lie with managers, not the market itself.
