Trust problem? The barriers preventing trustees from investing in UK private markets
UK pension schemes are willing to allocate more to domestic private markets – the challenge is identifying scalable, accessible opportunities in which to invest, while navigating broader market and regulatory dynamics.
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UK pension schemes increasingly express support for greater investment into domestic private markets. Policymakers, meanwhile, continue to view long-term pension capital as a potentially important source of funding for UK economic growth.
Yet despite broad alignment in principle, allocations in practice have moved only gradually so far. The question is no longer whether schemes want to invest in the UK, but what is preventing them from doing so at scale?
In a new white paper, Sam Murphy, Head of Client Solutions and Product at Future Growth Capital, the independent private markets solutions business formed by Schroders and Standard Life, examines the barriers preventing trustees from allocating more capital to UK private markets today - arguing that the challenge now has shifted from commitment to delivery.
Key takeaways from the paper include:
Trustee appetite for UK private markets is stronger than often assumed. Investment decisions remain driven by fiduciary duty and expected returns, but schemes are broadly open to increasing UK allocations where opportunities are compelling.
Trustees cite a lack of investable opportunities at scale, concerns around risk-adjusted returns, and uncertainty around the policy and regulatory environment.
Specifically, existing access routes to private markets often fail to meet pension scheme requirements. Governance complexity, fragmented product offerings, fee structures and implementation challenges continue to slow deployment.
The next phase of growth will depend on creating scalable, diversified and governance-friendly investment solutions that can connect long-term pension capital with the UK private economy – as well as continued evolution in the regulatory landscape.
The paper concludes that the debate should move beyond securing commitments to UK investment and towards building the structures that enable those commitments to be deployed in practice.
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