Market oversight: UK pension funds - private market investment

Enabling UK productive finance through private market investment

Published: 21 September 2026

We engaged with participants in the occupational pensions industry to better understand the kinds of private market investment opportunities that UK pension schemes find potentially attractive to invest in. This report sets out our findings, including investment barriers and opportunities for schemes, and action trustees should now be taking.

Regulatory approach

We asked more than 40 key stakeholders about market opportunities, available investment vehicles, limitations, barriers, enablers and appetite of private sector defined benefit (DB) and defined contribution (DC) pension schemes for private market investments.

The exercise included engagement with investment consultancy firms, trustees, individual pension schemes, key industry bodies and supply side stakeholders, including some investment managers.

We looked at a range of private markets in the context of investment by UK occupational pension schemes. While the scope of the work was relatively broad, there was specific emphasis on UK investment opportunities, particularly in the infrastructure space.

We did not engage with local government pension schemes as they already have a significant history of investing in private market investments, including private equity, venture capital and local investment opportunities and therefore, fell outside of the scope of this engagement.

Key findings

Trustees are open to UK private market investments

Trustees and/or their investment advisers will generally consider investing in UK private market investments, provided the investments offered meet the scheme’s investment needs and characteristics. This is in relation to expected return, risk, diversification, cashflow profile and liquidity.

DC schemes and master trusts have made progress

There has been significant progress in deploying capital by schemes with the necessary scale and capacity to invest in private market investments.

Our analysis of master trust asset allocations as at 31 December 2025 showed most schemes already had some exposure to private market investments, although material allocation levels were less common. It should be noted the analysis only reflected invested capital and didn’t reflect either undrawn capital allocations or future planned commitments. Further insights on the progress schemes are making will be captured as part of our next data collection as at 31 December 2026.

Private markets are a relatively new investment opportunity with the potential for material levels of new capital to be invested over future years. The growth will be driven by:

Capital inflows: As referred to in a speech on the future of UK workplace pensions assets under management by occupational DC pension schemes (excluding micro and DB/DC hybrids) are expected to grow to around £1 trillion by 2036. This compares to the £249 billion managed by those schemes, as set out in the Occupational defined contribution landscape in the UK 2025.
Higher strategic allocations: As schemes gain scale and more experience of the asset class, and, as their governance and investment arrangements develop, there is the potential for schemes to move beyond initial target allocations of typically 5 to 10% and make ‘new’ and more material allocations to the asset class.

DB schemes have limited appetite

In general, where DB schemes are making investments in private markets it was typically to private credit or certain types of infrastructure and real estate.

Most DB pension schemes, with few exceptions, have limited appetite to invest further in private markets. This includes either committing new capital or increasing allocations to existing private market investments. The reasons are:

The lack of need for growth assets (as they are well funded and locking down risk).
The illiquid nature of these investments reduces their end-game flexibility and ability to exit without material penalty if they subsequently decide to transfer benefits to an insurer.
Open and some immature schemes, already hold material allocations to private market investments.

Where and how schemes are investing

In general, schemes often tend to make their initial investments in funds that offer blended access to some combination of private credit, infrastructure, property and private equity. There is much less interest in venture capital as an initial investment in private markets.

The range of private market investments that DC schemes we engaged with had already committed to are set out below.

Limited commitment to investment in private market asset class:

venture capital
natural capital/timber

Greater commitment to investment in private market asset class:

private equity
private debt/credit
infrastructure
property/real estate

Evolution of private market investment programs

Many DC schemes making their first material investment into private markets (beyond real estate) have made their initial allocations into more diversified private market funds, often with a global investment mandate. However, some of the more advanced schemes with more experience of the asset class have also started to invest in single strategy satellite portfolios of private market investments.

Long term asset funds (LTAF)

The first LTAF was authorised in March 2023 and since then over 30 LTAF sub-funds have been approved and are available. For many DC schemes, LTAFs offered by their scheme provider’s organisation have facilitated an initial route into investing in private market investments. However, some DC schemes have used other vehicles and approaches. More generally, the way in which DC schemes invest in private market investments, and the range and characteristics of the types of private market investments they invest in, will evolve as they gain greater assets under management scale and experience.

Direct investment

While some DC schemes have put in place structures to enable co-investments to be considered alongside their private market investment funds, none of the DC only schemes were yet in the position of being able to consider direct investments.

Target asset allocation

Some multi-employer master trusts we engaged with had a target asset allocation of 10% (minimum) in private market investments by 2030, with 5% (minimum) of the allocation to UK private market investments. Other schemes had a target asset allocation of 10% in private market investments by 2030 but had not set a target for their UK private markets allocation.

Some schemes had much higher targets of 20% or more, including their UK allocation, for investing in private market investments by 2030.

UK venture capital

The appetite for investing in venture capital and UK venture capital in particular, was limited. Where, schemes had invested they typically focused on later series investment where the risk was lower and the potential investment size more material.

Investment barriers and enablers

Here we set out considerations and concerns trustees are facing as they seek to increase investment in private markets.

Potential knowledge gap

In general, trustees may lack sufficient knowledge and understanding necessary to support further investment in private markets. Those who support and work with trustees, including employers and employee benefit consultants, exhibited different skills and knowledge levels of private markets and overall, there was a general need to improve understanding of private market investments and how this translates to improving member outcomes.

Private market investment arrangements typically require schemes to have more sophisticated investment governance and risk management systems. There continues to be a lack of specialist skills and resources across the DC consulting industry in private market assets compared to public market assets and further development is needed to support the continued growth in private investments.

Tension between fiduciary duty and targets for private market investment

The need to invest in line with fiduciary duty was a consistent theme in our engagements. This concern means some schemes did not set hard targets for UK private market allocations within their private market investment mandates. These schemes generally expected to achieve an allocation of 5% (or more) to UK private market investments. However, they avoided setting hard targets because they wanted to ensure investments were only made in the best interests of members and in line with fiduciary duty.

Time lag on investments

For some private market investments, there can be a material time lag between the time from agreeing to allocate, setting up appropriate bespoke investment mandates and when all the investments have been sourced to fulfil the allocation. For some schemes this means there can be a significant gap between the private market investment ambition (for example a strategic allocation of 10% of the default AUM) and the actual investment to date (for example 6%).

Constraints in current regulation

There were several legislative areas highlighted by those we engaged with where change could help facilitate further private market investment. For example, legislative change could help remove some existing barriers to investment in private markets in respect of alignment in the treatment of performance-based fees in contract and trust-based arrangements. and some provisions within the current regime of employer-related investments.

The impact of guided retirement on investment portfolios

Most DC schemes are currently focused on implementing private market investments for the accumulation phase. However, pension reforms will drive further changes in the amount and types of private market investments trustees want to invest in throughout a member's lifetime. Reforms include the development of ‘to and through retirement propositions’ including guided retirement and emerging collective defined contribution options, and the expected increase in the level of assets under management near member retirement dates.

The challenge of market uncertainty

Most schemes are making progress in investing in private market investments, but some are being held back by a range of market uncertainties. These include those in relation to regulatory, policy and political uncertainties and the ability to meet the assets under management scale threshold requirements. There was awareness of government action to seek to address some of these barriers.

Concerns around fee structures and transparency

Ongoing concerns around fees, transparency and elements of fund governance were a recurring theme among those we engaged with. In particular, the level of fees (especially performance related fees), the opaque nature of additional costs and charges and the lack of clarity over how private market investment costs and charges were treated as part of the charge cap calculations were cited as primary concerns. Some DC and master trust trustees and providers also raised concerns around the potential for cross-subsidisation between different cohorts of savers in relation to performance-based fees.

Limited access to venture capital

Currently industry appetite for venture capital is limited. Structural problems, including small investment unit size and governance burden, make the asset class more challenging to invest in. Schemes typically gain exposure as part of a blended, multi-asset private market assets fund and/or where the investment risk is limited. An example of this is where the venture capital investments are restricted to late stage and scale up capital.

Inconsistencies in industry reporting

There are also some wider industry issues which are not helpful in supporting investment in private market investments. For example, the lack of consistency in private market investment disclosures and reporting increases the burden for trustees both in completing due diligence, monitoring the portfolios and in reporting on any investments made for their scheme.

Lack of availability of an investible pipeline of assets

For successful delivery of the ambition set out under the Mansion House Accord, government facilitation of a pipeline of UK investment opportunities was identified by stakeholders as one of the critical enablers. Feedback from our engagement highlighted concerns that there was a lack of investible UK opportunities, with the right investment characteristics, which pension schemes could access. In addition, trustees expressed concerns over the potential conflict between their duty to act in the best interests of members, and investing in UK assets, which may have a lower return expectation than alternative opportunities.

Increasing investment in UK private markets will require both a strong pipeline of high-quality investible opportunities, and fund structures which help facilitate such investments. Some stakeholders highlighted that the current levels of engagement with pension schemes by some of the public financial institutions were limited and could be improved to better understand their investment needs and help to develop more suitable investment propositions.

Action for trustees

A key focus for trustees should be on the potential value add and improvement in member outcomes that a well-diversified portfolio, including private market assets, may have the potential to offer.

Here we set out what action trustees should consider taking to support their investments in private markets.

Consider future development of scheme

DC and master trusts trustees should consider how their scheme might develop over the next five to 10 years and the implications that development might have for their scheme’s investment governance, investment management, monitoring and risk management arrangements.

Improve trustee knowledge and understanding

Trustees should review the current level of their board experience in relation to private market investments. Trustees should look to identify any current knowledge gaps and put in place plans to close any knowledge gaps, which are likely to be relevant to the future development of their scheme. Trustees should also consider how the membership of the trustee board is likely to develop over the future and how any knowledge gaps might be created and/or closed following future trustee board changes. As part of their ‘gap analysis’ trustees should consider whether they have access to sufficient practical experience of private market investments and the range of implementation options for those investments, across their trustee board. This should include experience of building and monitoring portfolios of private market investments.

Consider bandwidth – time and opportunity

Trustees should consider whether they have sufficient time and opportunity, within their trustee business plan and within their meeting plans to consider a wider range of private market investments, the potential opportunities and risks they present and to monitor them effectively.

Trustees should also consider how other pension industry change might impact the available trustee board bandwidth in the future, and how to respond to this.

Trustees should also consider the scope of existing delegations, for example, to investment advisers, investment managers and any in-house investment service providers and how they might need to develop in the future.

Strengthen investment risk management controls

Investing in private markets can introduce new and significant implementation risks. These include the potential for concentrated exposures in individual assets or sectors and the potential for liquidity stress events following market dislocations or scheme events.

Trustees should discuss with their advisers and develop an appropriate set of investment risk and investment governance controls for the private market investments they expect to hold. Where schemes expect to make material investments in private markets, trustees should consider the need for additional controls, suitable for a multi-year, multi-asset class, multi-strategy, private market portfolio.

Review adviser support

Trustees should review the resources and capabilities of their investment advisers, and any in-house investment service providers, in relation to private market investments to ensure they have the necessary skills, capabilities and knowledge to support a private markets program. Where trustees do not believe their advisors or in-house investment service providers have sufficient resources or capabilities, they should look to develop a plan to rectify the gaps, which may result in seeking alternative solutions.

Trustees should also review the objectives they have set for their investment advisers and any in-house investment service providers. Trustees should ensure that they include appropriate objectives in relation to private market investments and monitor the performance of their advisers against those objectives.

Engage with industry

We encourage trustees to actively engage with any industry consultations or any industry initiatives which seek to address issues that impact their ability to consider and invest in a wider range of private market investments. They should also actively challenge any potential providers or existing providers of investment management services if the level of disclosure, transparency or performance reporting around their private market investment arrangements falls short of expectations.

Explore the range of investment implementation opportunities

To date most DC pension schemes have invested in private market investments through pooled funds. Some pension schemes have also started to consider co-investment opportunities to help reduce implementation costs, although few have yet considered direct investment opportunities.

Trustees should consider how investment opportunities and implementation efficiencies might be achieved in the future. An example of this may be through the use of strategic investment partnerships, the build out of some internal investment management capabilities or through setting up collaborative investment management ventures with like-minded investors.

Next steps

We have shared our detailed findings with government to help them to better understand the market and a range of actions that could be taken to help facilitate a suitable supply of investible assets for pension providers, as outlined under the Mansion House Accord.

We will continue to engage with government and other key industry stakeholders and look to support any initiatives that reduce the barriers or increase the opportunities for trustees to be able to consider investing in a wider range of private market investments.