Master trusts and other DC pension schemes are increasingly utilising private markets in their default funds, from growth portfolios to retirement solutions, according to research by Longview Networks and Schroders
Private markets have hovered at the edge of defined contribution (DC) investing for several years: widely discussed and cautiously admired, but operationally difficult to implement at scale. Today, there is clear evidence of a step-change throughout the industry.
This picture clearly emerges from the DC Investment Survey 2026, conducted by Longview Networks and sponsored by Schroders.
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DC schemes are not only increasing exposure to private assets, they are doing so with purpose; balancing growth ambitions, liquidity constraints and governance realities against a regulatory backdrop that is simultaneously encouraging and constraining risk-taking.
The result is not a rush into illiquid asset classes, but a measured re-engineering of DC defaults – across both the growth and retirement phases – that puts private markets firmly on the strategic asset allocation agenda.
From interest to implementation
The survey, based on responses from 56 DC schemes representing £198 billion in assets under management, confirms that the industry has moved well beyond debating whether private markets belong in DC portfolios. The pressing question is how they can most effectively be utilised.
Private markets are clearly the biggest area of transformation when it comes to DC investment strategies
James Wall, Schroders
Private markets stand out as the single largest area of asset allocation change. Nearly three-quarters (74%) of respondents expect to increase private markets exposure in growth-phase strategies, while 59% expect to do so in retirement-phase portfolios. Only 18% expect no reallocation between public and private markets.
As James Wall, head of UK DC business development at Schroders, put it in a presentation accompanying the launch of the research: “Private markets are clearly the biggest area of transformation when it comes to DC investment strategies.”
Within private markets, the survey shows a clear direction of travel for desired allocations. Private equity is the dominant entry point: 53% of respondents increased their allocation at their most recent review, the highest of any asset class, with most headed for growth-stage defaults.
That reflects practical portfolio construction logic as much as return expectations. Most DC defaults lean heavily on listed equity in the growth phase, making private equity a natural complement rather than a conceptual leap.
“It isn’t a surprise that private equity is up there… as the most first and foremost asset class,” says Ryan Taylor, head of DC clients at Schroders.
Private debt, meanwhile, is emerging more strongly in later stages of the pension lifecycle. While 35% of respondents increased private debt allocations overall, 60% identified it as attractive for retirement-phase strategies – far ahead of private equity in this context.
It’s not just a case of allocating – you need the right assets
Paul Francis, principal at Quantum Advisory
“Private debt is starting to emerge more in the retirement space… as a lot of schemes have changed their glidepath to no longer targeting annuities,” he adds.
Joshun Sandhu, head of investment solutions and partnerships at investment platform Mobius, says that demand has evolved over the last five years.
“We saw initial DC demand in multi-asset private markets, then development of private credit demand, reflecting where the opportunities are,” he says. “Now we’re seeing more renewable infrastructure, and we expect private equity and venture to follow.”
Paul Francis, principal at Quantum Advisory, has observed a similar sequencing. “There was an initial focus on different types of credit strategies,” he says. “As the narrative around the benefits of private markets has built, it’s widened out. But private credit and infrastructure were always going to come before private equity and venture in DC.”
How much is enough?
While few now question whether private markets have a role in DC, there is less consensus on how large that role should be.
The Mansion House Accord has provided a political reference point, with signatories committing to allocate at least 10% of default assets to private markets by 2030.
The survey suggests most schemes are comfortable with allocation levels; only 24% of respondents disagreed, either moderately or strongly, with the assertion that DC schemes should invest at least 10% in private assets.
However, the respondents were far less comfortable with the requirement for accord signatories to direct half the private markets allocation into UK assets. Just 4% agreed that schemes should invest at least half of their private markets allocation domestically.
Beyond the overall allocation figures, according to Schroders’ interpretation of the data, many master trusts are already targeting private markets allocations comfortably above the stated minimum.
“Master trusts are targeting larger private asset allocations… between 15% and 25% seems to be where they are landing,” Wall says.
It isn’t a surprise that private equity is up there… as the most first and foremost asset class
Ryan Taylor, Schroders
Francis notes that allocations need to be large enough to justify the governance requirements without overly concentrating risk.
“For a very small percentage, you would question whether it has a meaningful benefit,” he says. “But once you get up to 25%, that could be a significant driver of risk in the portfolio, particularly if there’s a squeeze on liquid assets. Getting that balance right is tricky.”
In his view, consensus is forming, tentatively, at a slightly lower level than suggested by the Schroders. “The consensus probably comes out somewhere between 10% and 20%,” he says. “But it depends on assumptions around returns, fees and correlations. There’s no single right answer.”
Liquidity, quality and the limits of policy
One of the survey’s clearest findings is that the reluctance to concentrate private markets exposure in the UK is driven less by investment beliefs or political pressure than pragmatism.
Two-thirds of respondents expect less than a quarter of their private markets allocation to be invested domestically, just 26% expect it to reach half, and a mere 8% expect it to exceed the government target.
More than two-thirds (68%) cite a lack of suitable opportunities as the main barrier to increasing UK exposure. “There is a little bit of concern about whether there’s enough suitable assets in the UK in which to invest,” says Wall.
Taylor notes that the UK opportunities can be underappreciated and the economy already has a “huge” venture capital market. “It’s probably one of the biggest kept secrets… and in the years to come I think it will creep up in scale.”
He adds that “it’s a very brave pension scheme that says it has decided not to benefit people in the UK” and there are “big areas in the UK where we can invest money to get good returns and wider fiduciary benefits” such as infrastructure.
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He adds that a lot of attention is being paid to the barriers to making allocations and the supposed tidal wave of capital coming from LGPS and DC funds.
“There are now enough reports that show this tidal wave just doesn’t exist,” he says. “The market is already dealing with scale and there are suitable opportunities. We just need to do a better job of getting that information out there.”
Francis cautions that the availability of capital alone does not create investable opportunities.
“In private markets, it’s about the quality of assets,” he says. “You need to source, manage and structure them. If a wall of money flows in, it could end up inflating prices for assets that aren’t optimal. It’s not just a case of allocating – you need the right assets.”
Platforms, structures and the rise of LTAFs
Implementation, rather than intent, is now at the centre of discussions. The survey shows a clear preference for long-term asset funds (LTAFs), with 69% of respondents expecting to use them to structure private markets exposures. A distant 18% are expecting to use SICAV structures.
This dominance reflects LTAFs regulatory alignment with DC scheme needs – but these structures can also bring constraints. Sandhu notes that many schemes remain limited to the LTAF offered by their existing provider. “A lot of the market is restricted to the LTAF their platform provides,” he says. “They may get similar exposures, but they’re not necessarily choosing their private market sleeves in the same way.”
The recent surge in demand on our platform has primarily come from our DC institutional client base
Joshun Sandhu, Mobius
There are also complications around liquidity. Many LTAF vehicles include a meaningful allocation to liquid assets to help manage cashflows – a structure that can dilute headline exposure. “It’s not obvious that private markets LTAFs are a panacea,” Francis adds, “particularly at higher allocations.”
At the same time, he observes that many trustees remain cautious first movers. “Some clients think it all sounds very interesting,” Francis says, “but they don’t want to be the first. They want to see it tested.”
Francis sees platforms playing a useful role. “They reduce the governance burden on individual schemes,” he says. “Schemes can focus on the asset allocation they want, and let the platform provider worry about implementation.”
The transformation of vehicles has been years in the making. Sandhu traces today’s momentum back to lessons learned by the pension industry in the legacy defined benefit (DB) world.
“The recent surge in demand [on our platform] has primarily come from our DC institutional client base,” Sandhu says. “Five years ago, we were largely doing this for DB schemes. A lot of our learnings about how to get private markets to work – how to put them into portfolios, how to trade them – all came from that earlier work.”
Fees, value and trustee confidence
One potential brake on private markets adoption has been concerns around costs – yet the survey suggests this is not proving to be decisive.
Risk-adjusted returns were the most important factor influencing private markets strategy, cited by 52% of respondents, while embedded costs ranked highest for just 13%. The availability of opportunities was ranked as the most influential factor by 28%.
Francis is blunt about the cost implications associated with private markets. “The one certainty is that fees will increase for DC,” he says. “There might be a hope of higher returns, but that depends on asset quality and experienced management.”
Trustees, however, appear increasingly comfortable defending that trade-off. As Taylor notes, higher fees can be justified if value is clearly articulated – particularly as the industry moves away from a narrow focus on headline charges.
Taken together, the survey and practitioner insights point to a DC market that is changing decisively – but not recklessly.
Private markets are no longer peripheral. They are broadly being woven into default strategies, shaped by lifecycle thinking and constrained by governance and liquidity realities. Growth-phase portfolios are absorbing private equity; retirement-phase strategies are incorporating private credit; infrastructure is attracting interest where assets are tangible and scalable.
Pension schemes appear to be developing a deep understanding of the private market asset classes. Policy nudges matter, but they do not override fiduciary judgement. Platforms and structures are evolving, but trustee caution remains intact.
As Francis puts it, the real challenge is not whether DC schemes can invest in private markets – but whether they can do so effectively. “To rely on an assumption of a return premium,” he says, “you have to be investing in good quality assets, run by people who know what they’re doing. That’s not a given.”