Martyn James talks to PMP about the master trust’s recent UK affordable housing commitment and plans for other allocations
Now:pensions was one of the original master trusts set up ahead of auto-enrolment into workplace savings and had exclusively pursued a liquid markets strategy. Now, with more than two-million members, it has decided to allocate to a UK affordable housing fund and has plans to make other private markets allocations over the coming year.
The UK master trust was set up by ATP in 2011 and was acquired by Cardano Group in 2019. It has funds under management (FuM) of £5.6 billion, as of March 2025, which puts it on the edge of being a top-ten master trust by size. Cardano was last year acquired by Marsh McLennan, which already runs the £8.3 billion FuM Mercer Mastertrust.
Martyn James is the director of investment for Now:pensions and works with the independent Trustee that is responsible for the investment strategy. The investment strategy focuses on improving retirement outcomes while aiming for the portfolio to make real-world environmental and social impacts, to help mitigate risks and enhance returns. Now:pensions also looks to steward assets to support net zero by 2050.
James joined Now:pensions in April 2024 shortly before it was acquired by Mercer. Before this, he spent 22 years at Mercer, most recently as a partner in its UK DC business but also more than two years in its Latin America wealth business.
New strategy
Now:pensions’ members invest in its growth fund for most their working lives, until 10 years before retirement. Ahead of implementing its affordable housing allocation, the growth fund invests 75% in listed equities and 15% in bonds, comprising UK corporate and sustainable bonds, with the remainder split between 5% in high-yield debt and 5% in other assets including commodities. The strategy aims to deliver CPI + 3.5-4% gross of fees.
“We expect strong investment growth,” says James. “Since the inception of the new strategy at the start of 2024, we’ve been very pleased with its performance. It did well during the recent market volatility, behaving as we expected it to in both rising and falling markets.”
James says Now:pensions experienced some “disappointing” performance in 2022, ahead of its most recent triennial strategic review in 2023. This contributed to its decision to move its growth fund to a new strategy at the start of 2024.
This new strategy targets a 5% allocation to private markets, which it is in the process of designing. It has an “ambition” to increase this to 10% with 5% in the UK, in line with the Mansion House Accord, but this is dependent on finding investments “that stack-up for the membership”, he says.
The first stage is to invest 1% in the affordable housing fund, which equates to just over £50 million. “We’re replacing some of the bond allocation,” says James. “Reducing the allocation to corporate and sustainable bonds and investing in private markets should be additive to performance and drive long-term growth.”
It is the first part of a plan to create a multi-asset private markets portfolio. It is considering “the usual asset classes” of private equity, real estate, infrastructure and private credit, he says. “We intend to hit 5%, probably by the first half of next year.”
The precise allocation to each asset class has not yet been determined. “We won’t be taking a blunt-tool approach,” he says. “We’re trying to achieve something like CPI+ 4-6% from the private markets portfolio. We want multi-asset diversification and high investment growth, but what’s the best way of achieving that? We have budget constraints and strongly lean to the higher-returning asset classes.”
The private markets strategy will likely be implemented gradually, in line with the delays between making commitments and drawing down capital. “We hope to be able to announce what we’re doing this year and for investments to happen in early 2026,” he adds.
Housing allocation
Cardano directly manages most of Now:pensions’ liquid assets directly, including the public equity and bond portfolios, but the new affordable housing allocation is being made via a third-party fund.
The fund contains regulated rentals (for those on the social housing waiting list and receiving housing benefit), local affordable rentals and shared-ownership components. “The third-party manager was selected using Cardano research and we’re buying fund units directly,” says James.
A government affordable and social housing programme has provided a grant of £39 billion. “Private money can invest alongside it and we believe it’s a good opportunity,” he says. “The Trustee is very proud of its investment in affordable housing.”
“The trustees want to drive social good in the UK. This goes right across our ambition for the Mansion House Accord.”
Martyn James, Now:pensions
The Trustee saw an opportunity as it has both an attractive risk-return profile and creates real-world impacts. “The Trustee want to drive social good in the UK. This goes right across our ambition for the Mansion House Accord.”
“The Trustee also aims to consider ESG factors in private markets. It believes that incorporating environmental, social and governance (ESG) factors, as well as real-world sustainability impact, into the investment approach helps mitigate risks, enhance returns and is in its members’ best long-term interests. The Trustee’s investment beliefs on sustainable investment flow all the way through the overall strategy, and they are taking this forward into the private markets portfolio.”
Political risk
The UK Government’s key stated policy objective is to deliver economic growth, for which it is utilising the Mansion House Accord and other private markets initiatives. “It wants private money to support its economic drive and sees large institutional money, from DB pension schemes and DC master trusts, as a way of doing that,” he says.
“Our trustee board has been being very clear about its fiduciary duty, but it’s happy to sign up to the Government’s ambition and invest when it makes good financial sense for members. That’s what happened with affordable housing. If the Government increases the supply of opportunities, we would consider making further UK investments.”
However, government-backed programmes are inevitably subject to political risk, as a subsequent government may take a different approach.
“Policy risk is something that we and the trustee have considered,” says James. “It’s a real risk, so it’s absolutely right to consider it. But we concluded that the UK has an affordable housing crisis. The waiting list for social housing is well over one million, so whichever government is in power will likely need to address it. We concluded that the political risk is something we can accept.”
Each leg of the portfolio – social housing, affordable rents and shared ownership – may be influenced differently by government policy. “They will be driven slightly differently, so there is an element of diversification. It’s unlikely there’s going to be a big reversal to driving more homebuilding, especially in the regions it’s needed most.”
Now:pensions will need to consider political risk in other areas, including around net zero, for its other allocations. “We will look at renewable infrastructure to support the energy transition in the same way that we looked at affordable housing,” says James. “There are opportunities that are both good financially and support the trustees’ beliefs. These are good investments for our members. Our members would likely look favourably on investing in the UK – so if it makes sense, we will do so.”
That said, Now:pensions invests globally throughout its portfolio and will maintain this across private markets. “We believe this aligns with the fiduciary duty to drive the best risk-adjusted return for members.”
It has not settled on the exact allocation levels for the global private markets asset classes. “We look through a global lens and want to be globally diversified,” says James. “We start off with a global approach but consider UK opportunities where they stack up, which might be in things such as venture capital in the future.”
Building scale
Now:pensions’ parent company has its own master trust and a wider workplace savings business in Mercer. “We are considering how the scale across the two master trusts could benefit us,” says James. “Nothing’s been decided yet, but we could potentially use our combined scale to invest in the same private markets assets.”
While the Government is plainly keen on industry consolidation, Now:pensions and the Mercer Mastertrust remain separate. Increasing scale potentially brings benefits through lower fees and access to better investments – but this could also be achieved collaboratively.
The master trusts are already working on how they might invest in private markets together. “We have different platforms, with different constraints and flexibility to invest, and this is just one of the things to work through. We can’t say what the fund structure would be, but we are considering options,” he says.
Looking ahead, Now:pensions is thinking about its ambition to increase its allocation to 10%. “We will consider progress towards that ambition in the next strategic review, which will take place at the start of 2026”.
