Clogged public markets drive DC pensions towards private assets

UK pension reforms and increasingly “clogged” public markets are ushering in a “new era” for defined contribution (DC) schemes investing in alternative assets, according to a new report from PitchBook.

The report finds that recent reforms, including the 2023 Mansion House Compact and the 2025 Accord, could unlock up to £74bn for private market investments by 2030. These initiatives aim to shift 10 per cent of DC capital into alternative assets, with a portion earmarked for UK-focused investments, across private equity, private credit, venture capital and infrastructure.

PitchBook also highlights how stagnation in public markets is accelerating the shift towards private assets. The UK now hosts more private equity and venture capital-backed firms than publicly listed companies, prompting asset allocators to rethink traditional capital allocation models.

Regulatory changes are further easing the transition, with structural barriers being reduced through vehicles such as long-term asset funds (LTAFs), alongside charge-cap reforms and the forthcoming value for money framework, making private market allocations more practical and attractive for DC schemes.

Major asset managers including Schroders and Legal & General have already launched, or are in the process of developing, LTAFs spanning private equity, infrastructure and private credit.

“After decades in which UK pension capital was largely absent from venture capital, growth equity and other illiquid engines of economic growth, we are witnessing the beginning of a new era where retirement savings and private enterprise are more closely linked,” said Nicolas Moura, senior EMEA private capital analyst at PitchBook. “The rationale is clear: with public markets offering fewer opportunities and the old defined benefit workhorses retreating, tapping DC pensions is both a necessity and an opportunity.”

The report also points to government-led consolidation efforts under the Pension Schemes Bill, which aim to merge smaller schemes into larger “pension megafunds”, mirroring models seen in Australia and Canada that could drive money into private markets.

For example, in May Smart Pension committed 15 per cent of its default fund to private markets over the next 12–18 months. This allocation is split between 5 per cent private credit (already deployed), 5 per cent private equity and venture capital and 5 per cent renewable energy infrastructure. By 2030, this could equate to around £4bn of Smart’s assets being directed into private markets, the report said.

However, despite the momentum, PitchBook notes that default DC fund allocations to private markets remain below one per cent.

“As of now, the numbers are small and the change will be incremental,” Moura added. “There will be learning experiences as schemes refine how to invest effectively in private markets. Collaboration between government, regulators and industry must remain strong, and trust and transparency will be key to maintaining stakeholder support.”