Key facts
- UK pension funds are encouraged to increase investment in private markets.
- Smart Pension, a large UK provider, advocates for greater private market allocation.
- Smart Pension has already allocated 15% of its default fund to private markets.
- The Mansion House Accord mandates a 10% private market allocation by 2030.
- Investment in digital infrastructure, such as data centers, is also recommended.
Andrew Evans, Group CEO of Smart Pension, has urged UK pension funds to increase their investments in private markets, moving away from traditional public equity benchmarks. He argues this shift is crucial for meeting long-term member obligations and stimulating economic growth. Evans highlighted that while some trustees may be hesitant due to monitoring complexities, the long-term benefits for members make it imperative for the industry to allocate more capital to private markets and venture capital.
Smart Pension, a rapidly growing master trust with two million savers and over £10 billion in assets under management, has already embraced this strategy. The company credits its growth, partly driven by acquisitions and scheme consolidations, to its significant allocation in private markets. Currently, Smart Pension holds a 15% allocation in private markets within its default fund, exceeding the 10% target set by the Mansion House Accord, which also requires a 5% allocation within the UK by 2030.
Beyond traditional private equity, Evans also recommended that pension funds explore investments in digital infrastructure, such as data centers, as a potentially less risky alternative to investing directly in specific AI platforms. He expressed confidence in London's venture capital market, ranking it among the top globally, though he noted a reliance on foreign capital due to skepticism from UK investors. Evans also voiced support for government reforms aimed at consolidating the pension market and preventing domestic capital from flowing overseas, acknowledging the efforts to create a more competitive landscape with fewer, larger funds.