‘Access was only the beginning’: three years on from the UK’s first LTAF
Debates around private markets in DC pensions have shifted from regulatory ambition to defining successful implementation. In this interview, Vikram Bhandari shares our insights from three years of managing the first-ever Long-Term Asset Fund.
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It was 2023 when the first LTAF was formally approved: Schroders Capital’s Climate+ LTAF.
The ambition was to give DC members access to the long-term return and diversification potential of private markets, while supporting investment into the UK’s productive economy encompassing growth businesses, infrastructure, housing supply and the energy transition.
Along the way and since then, government initiatives including the most recent Mansion House Accord have seen pension providers commit to allocating at least 10% of DC default funds to private markets by 2030, with 5% dedicated to UK productive investments.
The conversation has shifted. The question is no longer simply whether DC schemes can or should access private markets, but how they can do so in a way that is disciplined, balances liquidity and broader governance needs, and is aligned to enhancing member outcomes.
Ryan Taylor, Head of UK DC Clients at Schroders, sat down with Vikram Bhandari, Head and Chief Investment Officer of Schroders Capital Solutions, the team that manages the Climate+ LTAF, to uncover the key insights we’ve gained from the first three years of managing the fund, how we think about portfolio construction in a multi-private markets context amid a volatile market backdrop, and what it all means for DC investors today.
Ryan Taylor (RT): three years in, the market has moved on from discussing LTAFs in theory to looking at what implementation means in practice. Before we get into the learnings from the past three years, where does Climate+ stand today?
Vikram Bhandari (VB): Climate+ was designed from the outset to give DC and DB (defined benefit) investors diversified access to private markets via a multi-private-asset portfolio that delivers a financial return with environmental and social impact. What makes it distinctive is that it brings together private equity, infrastructure, real estate and other climate-oriented solutions into a single, open-ended LTAF structure.
Since launch in April 2023, the fund has moved from its initial ramp-up phase toward what we would describe as a more mature, steady-state portfolio. It now encompasses exposures across renewable infrastructure, private equity, real estate and climate credit, with a growing investment pipeline as the fund scales.
That investment journey matters because the wider market is now asking a more practical question: not just whether LTAFs work, but what good implementation looks like.
Recent industry polling suggests that adoption of private markets by DC schemes is broadening, but still uneven. A March 2026 Pensions UK Investment Conference poll found that private markets were already a core component for 30% of DC portfolios, while a further 35% were assessing the cost-benefit case.
The direction of travel is clear; implementation is where the rubber meets the road.
RT: that’s an interesting point. One concern when LTAFs launched was whether managers would feel pressure to deploy capital quickly, simply to prove the model worked.
In this context it is notable that the past three years have also coincided with higher rates, challenging financing conditions – and so slower deal activity across much of the market. What has worked in that environment?
VB: from the outset, we took a deliberate, disciplined approach to deployment, rather than trying to force capital into the market quickly. That discipline has been important because different private asset classes deploy at different speeds and private markets activity can also ebb and flow.
In terms of sequencing, we started by building exposure through semi-liquid and scalable strategies, particularly in infrastructure and liquid climate credit. That allowed us to put capital to work efficiently in attractive segments and with greater diversification, while maintaining flexibility to adjust exposures with inflows.
Alongside that, we began building the private equity allocation, which we see as an important driver of returns in excess of listed equities over the long-term. Investing in private equity requires a high degree of selectivity and diversification over vintages, which naturally can take longer to deploy.
Real estate followed slightly later in the ramp-up, reflecting both market conditions given the opportunity set, particularly in light of the correction across the asset class globally in the two years to 2024. Patience has its benefits as we now see greater value in opportunities than before.
What’s important is that throughout this period – including a fairly challenging macro backdrop with higher rates and slower deal activity – we remained patient and selective. The key lesson is that deployment should be disciplined, intentional, and diversified across a number of dimensions. This is where it helps to have deep expertise in sourcing and investing across specialist teams, multiple investment strategies, and implementation flexibility.
RT: let’s zoom out a little bit and talk about your experience managing the UK’s first LTAF. Every new market structure comes with practical friction - what has been harder than expected?
VB: operational complexity has probably been one of the bigger lessons for the market. An LTAF is not simply a private market fund placed inside a DC wrapper. It has to work through pension platforms, trustee governance processes, reporting frameworks and liquidity constraints – that takes time.
Cashflow management also becomes increasingly important as a fund moves beyond launch. On the inflow side, one advantage of the structure is that subscriptions are visible through notice periods. That allows managers to plan deployment and maintain an investment pipeline.
The Schroders Capital Solutions portfolio management team has over a decade of managing multi-private asset portfolio using liquids and semi-liquids to pace commitments and to ensure capital is efficiently deployed as efficiently as possible without creating drag. We covered this point in a separate thought leadership piece – including the profound impact reducing cash drag can have on outcomes.
That is particularly relevant because DC assets are expected to keep growing. By 2035, Pensions UK has forecast that DC master trust assets could rise from £165 billion to more than £700 billion, while contract-based DC assets could rise to around £600 billion. A larger DC market means private markets structures will need to absorb more capital, without weakening investment discipline.
RT: private markets investors are familiar with the J-curve - early returns being muted as capital is deployed and costs are incurred before investments mature. From the perspective of implementation of your portfolio, has that dynamic played out as expected?
VB: what we’ve seen so far is encouraging, particularly given the stage of the fund.
We should be careful not to suggest that the J-curve disappears. In traditional private markets investing, particularly in some asset classes that have upfront transaction costs, it remains a real feature. But portfolio construction and the choice of implementation can change the experience.
During the ramp-up phase, performance has been driven by a combination of private equity capital appreciation and regular income yield from infrastructure and liquid assets, which has helped offset the typical early-stage effects you might expect related to transaction costs or partial deployment.
That is an important point for DC schemes. A diversified private markets portfolio can have several return drivers, rather than relying on one asset class or one exit environment, which can provide greater diversification and a smoother investment journey ahead.
Now, as we move into steady state, the return profile should evolve as investments mature. We would expect performance to increasingly be driven by private equity value creation and realisations over time, and yield from infrastructure and real estate. Also, as the LTAF has grown, the same level of inflows becomes a smaller and smaller proportion of the fund which, all else being equal, should be quicker to deploy.
The fund should also be more attractive for new investors benefitting from a fully ramped, well diversified portfolio (vs. a concept at launch), and invest knowing that the same capital can be deployed faster now than before and you can access the ongoing returns.
RT: recent headlines around semi-liquid property and private credit funds have raised concerns about liquidity mismatch. What should DC schemes looking at LTAFs, which are similarly evergreen and semi-liquid funds, learn from those events?
VB: the first lesson is that liquidity terms must reflect the underlying assets – and need to be understood by investors. Redemptions are an important feature as the fund matures, and they need to be carefully managed.
For DC schemes, this is critical; members need confidence that their investment structure is robust. But private markets cannot be treated like daily-traded listed equities.
From a portfolio management perspective, this means designing liquidity into the structure. We maintain a liquidity buffer, understand the organic liquidity at steady state, and have access to income-generating assets to service potential redemptions without needing to sell long-term investments at the wrong time.
Stress periods do not necessarily change the principles, but they do change the emphasis. In normal conditions, the focus is on managing deployment (factoring in realisations and redemptions), overall portfolio construction as relative shifts, and having capital to source new opportunities. In stressed environments, the focus shifts more towards liquidity management for investment obligations and the potential for sustained redemptions, portfolio resilience, and critically supporting underlying assets.
Moreover, private market funds and allocations will only be implemented once trustees and advisers have fully considered the liquidity needs – and, importantly, the illiquidity budget – of the scheme. While it’s important to know there are liquidity features that can be used, this allows the funds to be seen and utilised for what they are – long-term investment options with the potential to enhance long-term member outcomes.
RT: the regulatory conversation has evolved, particularly around performance fees. How does that change the opportunity set?
VB: the key point here is that this is about improving the investible universe and member outcomes, not about increasing fees at the fund level or for the sake of it. That distinction matters.
Historically, the DC charge cap created constraints around certain types of private markets exposure. Some private equity co-investments, specialist managers and natural capital strategies may include performance fees – and excluding them entirely could significantly narrow the investible universe, which would not be in the interests of investors.
But as the market has evolved, and with regulatory clarification allowing trustees to exclude certain performance-based fees from the charge cap, it makes sense to broaden the opportunity set where that improves outcomes.
This should not be seen as a blank cheque. First, we are not proactively seeking fee-paying investments. The point is simply that we will no longer exclude them if they are otherwise compelling – and, crucially, if we believe they will improve member outcomes after taking fees into account.
Second, any investment with performance fees still has to meet our underwriting standards net of all fees and costs.
RT: for schemes still considering their first private markets allocation, what should they take from the first three years of the LTAF?
VB: the most important point is that private markets should not be treated as a policy exercise. The Mansion House agenda has clearly accelerated the debate – and the 10% target for private markets by 2030 is significant. But trustees still have fiduciary duties. The question is not simply how much to allocate, but how to allocate well.
The key risk isn’t the allocation itself - it’s poor implementation. That means being clear on objectives, pacing, liquidity, fees, governance and member communication.
It also means recognising that private markets can make pensions feel more tangible, with the potential to enhance member engagement beyond just financial rewards.
Three years in, the lesson from LTAFs is not that the structure solves every problem. It is that access was only the beginning. The real test is execution: disciplined deployment, liquidity management, robust governance and a clear focus on member outcomes.
Case study: Low-carbon agriculture in the UK
RT: can you give a tangible example of how these investments show up in the real economy?
VB: one example is our investment in large-scale, energy-efficient greenhouses in the UK. These facilities produce over 100,000 peppers a week, but at roughly 75% lower carbon emissions than conventional methods.
They achieve this by using waste heat from a nearby water recycling plant - an efficient closed-loop system that reduces both costs and reliance on imported energy. Beyond decarbonising food production, the project supports rural employment and strengthens domestic supply chains. For pension savers, it’s a very direct link: their capital is helping produce food on British shelves while generating long-term returns.
Case study: Affordable housing and social impact
RT: and on the social side - what does impact look like in practice?
VB: a good illustration is our partnership delivering 38 affordable homes with YMCA and Bellway. These are for young people transitioning out of supported housing, offering a pathway to independence. Rents are set at genuinely affordable levels, and importantly, the surrounding infrastructure - schools, healthcare, local services - was in place from day one.
The investment also helped bridge a funding gap, allowing construction to proceed ahead of grant funding and accelerating delivery. Today, dozens of young people are living with greater stability and opportunity. It’s a reminder that well-structured investments can generate stable, inflation-linked returns while addressing pressing social needs.
Whether it’s helping tackle homelessness, decarbonising our food system or transforming healthcare, these are stories members can genuinely relate to.
When people can see their savings making a difference in the real world, engagement tends to follow - from checking their pension more regularly to contributing more and taking greater pride in how their money is invested.
Crucially, none of this, in our experience, requires sacrificing performance. On the contrary, sustainability and positive impact can go hand in hand with delivering robust, long-term returns.
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