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With UK pension schemes committing more capital to private markets, they’re increasingly focusing on the size and quality of the opportunity set. As allocations grow, the debate is turning naturally to the real-world investments that sit behind them. What do private assets for DC actually look like, and how are savers already gaining exposure to them?
Bolstered by regulatory reforms and an increased demand for new sources of long-term return, private markets are rapidly becoming an established feature of DC pension investing. As a result, the focus is shifting from how much schemes will invest to where their capital will be deployed. Along with that comes increased scrutiny of the size and scope of the private market landscape in the UK.
Some commentators are questioning whether it holds enough opportunities to absorb growing allocations. It’s a reasonable concern – more schemes investing inevitably means higher demand for private market investments. Yet the UK private market ecosystem already spans infrastructure, lending, real estate and growth businesses across a wide range of sectors. And looking through too narrow a lens risks underestimating both its scale and diversity. Considering some real-world examples shows us the types of opportunities DC investors are already accessing.
More opportunities than many assume
It’s not unusual for UK private markets to be discussed mainly in terms of venture capital – after all, it’s one of the most headline-grabbing private asset sectors, and we’re all familiar with Dragon’s Den. But in reality, the market’s much broader. Private credit, for instance, is already funding everything from healthcare facilities and digital infrastructure to growing businesses and specialist lending.
UK private credit in practice
- Healthcare facilities – One opportunity comes from the healthcare sector. In the central Scotland city of Perth, private capital has helped to fund the redevelopment of a restaurant building into a purpose-built diagnostics centre that will provide services such as MRI, CT and ultrasound scans. Since projects like this often need long-term funding and specialist expertise, they can be a natural fit for private market investment managers.What’s most interesting is that this isn’t the sort of opportunity most DC investors would recognise from listed markets. It sits in a part of the economy that’s essential to everyday life, but it’s typically accessed through private capital and not public equities. And while healthcare facilities are one example, they’re far from the only kind of infrastructure attracting long-term private investment.
- Digital infrastructure – We can see the same trend in UK digital infrastructure. Here, private capital is helping to finance cloud-computing facilities, connectivity and the growing use of data-driven technologies. One recent investment provided funding for a portfolio of UK data centres. These are operated by nLighten, a pan-European platform that focuses on local and regional capacity.In a similar way to healthcare facilities, assets like these tend to require significant upfront investment and long-term capital. They also sit at the heart of everyday economic activity, underpinning everything from online services and communications to increasing AI usage. Opportunities of this kind show how private markets can give exposure to parts of the economy that are difficult for investors to reach through public markets alone. But once again, not all private asset opportunities are tied to established assets and infrastructure.
Venture capital in practice
- Backing innovation – In venture capital, the picture is quite different. There, private investment helps support early-stage businesses as they scale up and develop new products and technologies. One example is Wayve, a UK artificial intelligence company that’s developing autonomous driving technology – better known as driverless cars. Businesses like this often need large amounts of capital over several years before they become commercially mature. This makes private-market funding an important source of support.Unlike private credit investments in healthcare facilities or data centres, here the value lies more in intellectual property, specialist expertise and future growth potential than in physical assets. It shows how UK private markets can provide DC investors with access to innovative businesses working at the forefront of technological change.
What these examples tell us, and what they mean for DC investors
The examples above are all very different, but that’s exactly the point. Discussions about UK private markets can sometimes focus on a relatively narrow group of investments, giving the impression of limited opportunities. In reality, private capital is already supporting a wide range of activities across the UK economy, from healthcare and digital infrastructure to innovative technology businesses.
With allocations to private markets continuing to grow, the debate is likely to move beyond whether opportunities exist and towards how investors identify, access and combine them in portfolios. For advisers and trustees, understanding what sits behind private market allocations will become increasingly important.
The UK’s private market opportunity set may not always be as visible as its public market equivalent, but that doesn’t make it any less diverse. Through their pension investments, members are already beginning to access opportunities that many would struggle to reach through listed markets alone. Concerns about whether the UK can provide enough opportunities for DC investment are understandable, but they should be seen in context. UK pension schemes are already investing in an established private asset market that spans private credit, infrastructure and equity. As more DC capital flows into the market, we should take confidence from the fact that this ecosystem already exists. The challenge won’t simply be finding opportunities, but identifying the right ones, accessing them effectively and executing with discipline. That’s where the role of experienced asset managers remains crucial.
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