FutureWise’s James Monk talks to PMP about the value of taking a multi-GP approach to master trust construction and how performance fees can improve value
Fidelity’s defined contribution (DC) workplace default investment strategy FutureWise is taking a unconventional approach to private markets.
While not a signatory of the Mansion House Accord, Fidelity is significantly integrating private asset investments within FutureWise. Rather than pushing to reduce performance fees, it sees them as a tool to create alignment between manager and member to drive better outcomes. Another key differentiator is the wide diversification of its external GP commitments.
James Monk, investment director for workplace investing, expects FutureWise’s AuM to grow rapidly to over £40 billion by 2030, doubling from its current £21 billion. “This is important to secure its future under new measures included in the Pension Schemes Bill, as well as driving greater value and improving member outcomes,” he says.
FutureWise operates a single default strategy, which Fidelity also offers to its master trust, contract-based DC clients and even some single-employer trusts. “It represents our best ideas thinking,” says Monk.
Multi-asset approach
Private markets are an increasingly important component of these best ideas. FutureWise is an anchor investor in the Fidelity Diversified Private Assets LTAF and started allocating this year. Over the next three years, it intends to build its growth-phase default exposure to 15%.
The LTAF takes a best-of-breed approach, where it controls the asset class allocation strategy but mainly relies on external GPs to manage mandates. “Its ethos is to allocate to specialists within each sector and asset class to build a diversified portfolio,” says Monk.
“In order to deliver strong diversification, we expect a very significant majority of our managers to be external and, of the seven GP commitments as of June 2025, only one is internal. We put internal managers through the same due diligence process as external managers to maintain the integrity of deployment.”
The UK today represents approximately 10% of the global private market universe and we want to allocate globally based on expected returns and outcomes
James Monk, FurtureWise
He expects this will result in close to $1.8 billion being allocated to private markets over the next three years. “FutureWise started integrating the LTAF in February and has since allocated over £300 million.”
One of the LTAF’s first allocations was to Bridges’ Property Alternatives Fund VI, which invests in real estate and property-backed operating businesses in underserved areas and sectors in the UK and Europe. “It’s a very strong manager with a consistent track record across its earlier vintages. The strategy also drives a lot of positive social impacts” he says.
It has also allocated to Haveli, a private equity (PE) manager specialising in high-quality US technology companies. “It’s the first vintage, which shows we consider the whole universe. The manager is very experienced and has a strong track record, and is investing significantly in the fund.”
It also recently invested in CVC’s Strategic Opportunities Strategy, which mainly focuses on lower-risk buyout assets across Western Europe and North America. “CVC comes with a significant pedigree in PE. It demonstrates our strong commitment to quality managers in a way that’s consistent with value-based outcomes,” he adds.
These are all closed-ended primary funds. “That’s where we see the best return profile and the strongest and most focused skillsets,” says Monk. So far, the Fidelity Diversified Private Assets LTAF has committed to three private equity, two real estate and two infrastructure mandates. This will continue to progress through the ramp-up period over the next couple of years.
The strategy intends to have an equal allocation to private equity, real estate, infrastructure and private credit, but can consider other allocations tactically where it sees strong potential risk-adjusted returns. As a semi-liquid fund vehicle, the strategy will also allocate to liquid public assets to ensure a strong liquidity buffer to service client flows, capital calls and secondaries purchases.
“It will maintain a balanced multi-asset approach, as this builds resilience into the portfolio, brings greater flexibility to allocations, and protects value. We are orientated by our fiduciary duty, and the return profile is the critical factor in our decision making,” he says.
“Some of our earlier allocations have been to technology and digital infrastructure but we have also been keen to address any regionally nuanced demographic demand, through senior care and living and industrial assets across the UK and Europe. While venture capital is far from ruled out, it is important for us to think carefully about managing risk of loss, given the sensitivity that DC memberships have toward loss within pensions.”
The LTAF considers VC a satellite allocation only “where the team sees very focused and strong skillsets”, he says. “It’s important to mitigate the risk of failure as much as possible. It’s somebody’s pension, so we take the risk of failure very seriously.”
Mansion House Accord
Despite Fidelity expecting FutureWise to comfortably meet the 10% Mansion House Accord allocation target it decided not to commit to the initiative.
“We’re not a signatory,” says Monk. “We want to ensure our portfolio managers can invest wherever they see the best opportunities. The UK today represents approximately 10% of the global private market universe and we want to allocate globally based on expected returns and outcomes.”
Fidelity is likely to allocate a greater proportion to non-UK assets than the 50/50 split suggested by the accord. “It’s difficult to say where the portfolio will land, as we’ll be led by where the opportunities are over the next few years, but we intend to allocate in a market-aligned way,” says Monk. “The LTAF investment team casts the net as wide as possible, selects investment themes and whittles down opportunities to a short list.”
While FutureWise’s public market equity exposures are already in alignment with global market capitalisations, within the Fidelity Diversified Private Assets LTAF its private market portfolio has already made a significant early commitment to the UK. “We’re still ramping up. But as we diversify our GP exposure, we expect that to tend [down] toward 10% in alignment with the market sizes of the respective regions” he says.
Differentiating factors
FutureWise’s integration of private assets via the LTAF is “highly differentiated in a few areas”, according to Monk. Firstly, its multi-GP approach means it expects to allocate to 15-20 core GPs when the LTAF is fully mature in three years. “That’s significantly different to many of our competitors,” he notes.
Secondly, more than half of the LTAF will be allocated to closed-ended strategies. “This is the broadest part of the private asset universe, with the best skillsets and track records and hopefully where the quality is strongest. We focus on the structures that offer the best return profiles,” he says.
Thirdly, it differentiates itself in its approach to performance fees. “We thought very carefully about how to accommodate them in a way that treats all investors fairly. The issues of incentivisation and alignment between members and managers keep coming up – and performance fees are a great way to achieve this alignment and enable access to the top-quality managers, while also structuring the fee to drive the best outcome possible for the investor.”
This is a different approach to some other master trusts, which have decided not to pay performance fees for any of its allocations.
“The DC industry has caught on to the fact that the best managers will not forego performance fees and that it is still competing for access alongside a myriad of less cost sensitive investors,” says Monk. “Performance fees can be a big part of their remuneration, and fosters incentivisation and alignment. We’ve embedded the ability to accommodate them as a key design principle in our structure.”
He says these fees are critical to it securing access to quality managers, especially when they have capacity constraints. “It’s important to not just allocate to the manager offering the best discount,” he says. “If you allocate purely on a cost basis, you could allocate to a strategy that’s lacking funding for a very good reason.”
FutureWise looks for a “bespoke approach” for each asset class and skillset required. “It is important for us to maintain a strong value relationship on behalf of DC investors, increasing fees in alignment with private asset exposure.,” he says.
Nonetheless, justifying an increase in costs is not always an easy task. “It’s definitely been an educational journey,” says Monk. “It’s important to demonstrate how focusing exclusively on cost can drive negative outcomes. We’ve been very pleased with how our clients have engaged with the concept of value in this context. The design principles of our LTAF have been essential to our clients becoming comfortable.”
Its negotiating position is helped by the Fidelity brand being viewed positively by managers and the potential to form fruitful long-term partnerships, he says. “This has been enormously beneficial for driving better value for investors.”
In terms of sustainability, Monk says FutureWise “robustly considers ESG objectives” but acknowledges that private markets funds do not always offer the transparency that DC investors expect. “To ensure we access the broadest universe and best quality assets, we haven’t made TCFD reporting a red line. We integrate ESG risk management into our due diligence and apply it across the overall portfolio – but we also need to take a pragmatic approach toward the private market’s engagement with ESG today.”
He says he “absolutely sees huge benefits from investing” in a wide variety of climate solutions and notes real assets are often clearly aligned with net zero. “You just need to do more detailed and focused due diligence and ongoing monitoring. The LTAF has quarterly meetings with all our managers and reviews deployments against our ESG philosophy.”
Looking ahead
The government, as set out in the Pension Scheme Act, would like master trusts to consolidate into £25+ billion megafunds – and FutureWise could quickly achieve this through acquisitions. “We haven’t excluded that possibility,” says Monk. “But as we expect FutureWise to hit £40 billion by 2030, it’s not necessary.”
One benefit of growing organically is being able to clearly forecast cash flows, according to Monk. “We can control the quality of deployments over time. A significant consolidation event could create an accelerated timeframe for allocations – and attempting to gain exposures quickly could compromise quality.”
Monk is “hugely supportive of the government’s trajectory” and “absolutely sees the UK as being a fantastic place to invest”. “The UK has a lot of fantastic attributes including highly innovative universities and a mature financial system to support private markets. We see the UK as being a key part of the portfolio. But we will be led by the opportunities, rather than trying to hit specified thresholds.”
Key facts
Total AuM: £21 billion initial capital
Private markets allocation: Started building in February 2025
Capabilities: Fidelity LTAF team, Fidelity internal public and private asset solutions, external fund managers
Current private markets: UK and EU property, US and EU private equity, and US and EU infrastructure (as of June 2025)
