As buyout volumes surge and DC reform gathers pace, Phoenix is building an integrated private markets platform to source assets at scale and sharpen its competitive edge.
Phoenix Group’s platform is one of the largest long-term saving and retirement business in the UK, with £300 billion of assets under administration across its balance sheet and customer savings.
Phoenix manages £250+ billion of policyholder assets, split between £200 billion in defined contribution (DC) schemes and £50 billion in legacy with-profits client assets. The remaining assets are held on its own balance sheet to support its annuity business, in the DB side.
Phoenix, due to be rebranded Standard Life next March, allocates across public and private asset classes. It has centralised the management of private markets assets for every one of its business lines. Cecile Retaureau joined as head of private markets in August 2024 to lead this centralised team.
Retaureau leads this team, with professionals across real estate, infrastructure, public finance, corporate credit and private equity. She both heads the firm’s in-house origination and works with external asset management partners.
“We actively help members save for retirement in the DC component as well as paying them income in retirement with annuities,” she says.
Buyouts and annuities
The pensions buyout market is increasingly competitive, with new players due to add to the ten active participants battling for record volumes approaching £50 billion over the last couple of years, according to Hymans Robertson. As most DB pension schemes have become mature, BPA flows “look quite exciting”, she says, with £50-70 billion of scheme assets annually heading for buyout over the next five years.
Phoenix has £45 billion on its balance sheet to support its annuity business, which includes bulk purchase annuities (BPA) and individual annuities for DB members. “We’re a very active player in UK BPA, which has become a hot market,” she says.
The annuity business necessarily has a relatively long investment horizon. “We’re trying to execute MA transactions with a weighted-average life of around 12 years. Investing or lending for this tenor requires us to be convinced by the sector, borrower, market and the macroeconomic environment.”
We are planning to double our investments over the next two to three years – so we need to make sure we are ready and competitive for larger pension schemes
Cecile Retaureau
Phoenix transacts approximately £6-8 billion of annuities each year. “We tend to invest, in line with the industry average, up to half in private markets and alternatives. Our strategy is to source and invest assets that make us competitive and able to deliver best-in-class returns.”
The team has been originating, structuring and deploying up to £3 billion in private markets and alternatives annually to back its annuities business – but this is expected to increase in line with predicted demand for scheme buyouts. “We are planning to double our investments over the next two to three years – so we need to make sure we are ready and competitive for larger pension schemes,” she says.
“How competitive we are in private markets, particularly in private debt origination, directly leads to how competitive we are in the buyout market. We’re very excited about doubling the platform.”
Policyholder assets
Retaureau is most energised about the growth of Phoenix’s workplace DC pensions book, spurred by the Mansion House reforms. Phoenix signed the Compact two years ago and committed to the refreshed Accord this year. It is currently preparing for its first DC private markets allocations.
“We committed 10% of our DC default fund into private markets and alternatives by 2030. Given the size of our book and expectation we will benefit from UK DC consolidation – with the chancellor expecting £25+ billion megafunds – the outlook is super positive,” she says.
Phoenix is following a best-in-class manager selection strategy within an open infrastructure. “We will not invest directly, so it’s all about manager selection in an LP and co-invest model, or a building SMA or fund-of-one strategies.”
Phoenix set up a joint venture with Schroders Investment Management to make private markets allocations. Future Growth Capital (FGC) is a separate investment management company composed of people from both organisations.
“We’re supporting the FGC team to select the right managers and strategies for our first £2.5 billion allocation, across venture capital, private equity, private credit and real assets,” she says. “We often do trilateral introduction calls or meetings. Sky is the limit in DC and we’re already excited about the next £5 billion and then the next £10 billion.”
However, Retaureau says she “don’t yet know whether 10% is the right level” for a master trust to allocate to private markets. “Our Canadian peers are closer to 15% and our Australian ones are closer to 20%. We’ll see how it goes with the first 10%, but we may not stop there. Our two-to-three-year aim is to be seen as a large LP and co-investor like Australian superannuation funds. The potential scale is exciting.”
Phoenix also retains a substantial with-profits book, although these legacy policies are now in runoff. Phoenix had been active in private markets, taking LP stakes and making co-investments rather than investing directly.
“We focused on manager selection across VC, growth, private equity, infrastructure and real estate equity,” she says. “We’re still managing a little over £2 billion today, but we haven’t grown it given our with-profit strategy is ramping down.”
Centralised team
Phoenix restructured its private markets operations in late 2024 into one centralised team. “It is quite new, but is working well,” she says. “We can look at the full spectrum. Our investment managers can do anything from VC to private credit, debt & equity, MA and non-MA – it’s all centralised in the same team for the group,” she says.
This team is organised into three divisions. The private credit division focuses on corporates and financials, with most of its activity originating Solvency II MA debt for its annuity business.
The real assets division is made up of real estate, project infrastructure and public/blended finance. “Here we tend to have more complex trades, with longer time to executions and involving specific skillsets,” she says. “Merging real assets, real estate and infrastructure was key. We did that at the end of 2024 to increase synergies and capture megatrends more efficiently.”
How competitive we are in private markets, particularly in private debt origination, directly leads to how competitive we are in the buyout market.
Cecile Retaureau
These megatrends include: demographics, focusing on social and affordable housing; energy, covering the transition and energy security; and digitalisation, including datacentres.
The third division is structured credit and alternatives. Structured credit covers situations “when we need a clever or innovating structure such as securitisation, a wrapper or repack – it allows us to turn non-MA into MA, or non-IG into IG, via cautious structuring and weighing, to make it conservative enough for us”.
The alternatives part contains “quite small” VC and PE components but “if we grew policyholder investments, it might become a separate division”.
Retaureau’s team also supports Phoenix’s policy investment office, contributing to strategic asset allocation, manager selection underwriting, co-invest underwriting and execution. It also supports FGC’s manager selection across private markets.
Direct and indirect
For the annuity book, Phoenix operates a hybrid model of both direct and indirect investment. On the direct side, Retaureau leads 25 investment managers that directly source, structure, price and execute trades. “We can either do origination/execution directly with the borrower or via brokers, advisors or banks,” she notes.
On the indirect side, it leverages its strategic asset management partners. “We continue to source and deploy via partnerships,” she says. “We do this in jurisdictions we know less well, or for products that are so complex they require one of our partners’ franchise or expertise. We have a global business, so our approach depends on the location and book.”
For example, in December 2024, the team began to expand into US and European commercial real estate (CRE) lending. “We originate in UK and Europe as it’s close to home,” she says. “But we rely on partners in the US, where we might not yet feel equipped to go direct in US CRE. It’s a market where we would typically leverage key strategic partners and best-in-class managers.”
Phoenix’s annuity business is currently backed by assets split into roughly equal thirds: private credit; real assets; equity release mortgage (ERM) solutions and structured credit. However, this balance depends on market conditions “We don’t do the same [volume] in each division each year,” she says.
“A few years ago, the bulk of our private credit volumes were in more vanilla US private placements (USPP). This year, our activity was more muted as relative value over public credit was not there. Instead, there was more relative value in small club and bilateral US PP as well as fund financing transactions. We have also been increasingly looking at capital solutions-like transactions where very large IG corporate trades are arranged and led by large PE firms rather than traditional bank syndication and distribution.”
Real assets
One main area of change is real estate. The bulk of its earlier exposures have been in UK social and affordable housing and in core real estate, such as student accommodation and healthcare.
“It has been expanding quite nicely and we are becoming increasingly international. We did our first trades in European commercial real estate lending this year and we’re super happy,” she says. “We have never had an issue with overexposure to real estate and its cyclicality – but we’ve always been cautious about where we expand.”
We are strongly focused on UK productive assets for our UK strategy, and privilege high societal and environmental impact for our global strategy
Cecile Retaureau
The strategy is sector-agnostic, guided by seeking best-in-class transactions. “We don’t shy away from cyclicality, especially in prime and super-prime locations, and have existing exposure, for example to hotels and offices. It’s a small part of our book, but we are very happy to diversify.”
The wider real assets team has increasingly refocused from core infrastructure to the energy transition, including grid connections and upgrades, datacentres and solar installations. “There is plenty to do while also remaining active in core infra – we’ve done transportation, electricity, gas transition and water,” she says.
Secular trends
Retaureau also sees attractive opportunities in secular trends. “There are a few noteworthy areas – such as when banks retrench due to regulation – rather than risk,” she says.
Banks retrenched from direct lending a few years ago, providing room for private credit managers. They are now retrenching from fund financing – such as providing leverage to alternatives firms – largely because it’s “punitive” under Basel IV if done beyond five years. “This year, UK insurers have sat side-by-side with banks, complementing their offering when they couldn’t lend for the full transaction size. We have expanded there cautiously.”
Phoenix is happy to finance diversified pools of private credit or private equity assets. “It is something we are comfortable with and have done successfully this year. That secular trend is here to stay.”
She sees another secular trend in defence and aerospace, with defence “essential and critical” for Europe and the UK under the NATO umbrella. “We are brainstorming how we can support the sector and deploy more private capital,” she says, while acknowledging a tension with sustainability concerns.
Sustainability goals
Retaureau says Phoenix still views sustainability and net zero as critical “even if a few banks, asset managers and PE firms have moved away from that goal this year, especially in the US”.
She says around 60% of shareholders’ (annuity) assets are in sustainable, transition or productive assets. “We are strongly focused on UK productive assets for our UK strategy, and privilege high societal and environmental impact for our global strategy,” she says. “We’re also on track to deliver £40 billion in sustainable transition and productive assets across both policyholders and annuity books in around 15 years.”
It delivers positive impacts both via managers and in direct investments. For example, Via Macquarie Asset Management, it lent £240 million to Westminster Council for it to purchase and refurbish 368 temporary accommodation properties.
“It provides emergency housing for the homeless while they wait for longer-term housing. It had perfect positioning – 42-year amortising, inflation-linked and double-A rating, due to governmental support. It ticked all the boxes for us.”
Conversely, it directly financed Luxembourg utility electric company Ensevo with EUR120 million, arranged by French bank CIC. “It allowed the group to invest in an ambitious investment programme of wind, solar and hydro power, to build for a sustainable future.”