The rapid shift into private markets is transforming UK pension investing, and the Pensions Management Institute (PMI) is warning trustees they must build new skills to manage the risks.
Publishing its latest Private Markets Industry Guide, the PMI highlighted that allocations have almost tripled since 2019, rising from 9% to 26% across UK schemes.
‘Productive finance’ investments now account for 16% of private defined benefit assets, the PMI reported. This includes allocations to infrastructure, property, private equity, energy, and transport.
The figure includes £119bn invested in property and other alternatives, the institute said. While this reflected a search for long-term, inflation-resistant returns, it also introduced greater complexity and governance demands.
Helen Forrest Hall, chief strategy officer at the PMI, said trustees could no longer treat private markets as niche exposure. She warned that schemes face tougher questions on access, governance and member outcomes as regulators expect clearer evidence behind investment decisions and deeper insight into risks.
“Private markets have evolved from niche to increasingly mainstream in recent years, and pension schemes can’t afford to sit on the sidelines. Trustees face tough questions on access, governance and member outcomes. The regulator expects evidence-based decisions, not guesswork.”
Helen Forrest Hall, PMI
Scott Foster, head of digital and governance solutions at CACEIS, highlighted a major shift in investment strategy. He said: “This is not a marginal adjustment but a fundamental recalibration of pension fund strategy, driven by a confluence of regulatory and policy pressure, the search for yield, and the imperative for long-term, inflation-resistant returns.”
Mithesh Varsani, head of investment solutions at Scottish Widows, added: “Investing in private markets can play a valuable role in pension fund portfolios but requires a thoughtful approach that balances opportunity with measured risk.
“Success hinges not only on access but on disciplined execution, strong partnerships and a long-term perspective, remaining agile in adapting to a rapidly evolving investment landscape.”
Alongside the opportunities in private equity, infrastructure, private credit and venture capital, the PMI’s report set out some practical challenges, including different access routes, integrating ESG considerations, improving cost transparency, and understanding the role of scale in unlocking value.
Smaller schemes may face particular barriers, the PMI emphasised, meaning collaborative approaches could help them participate more effectively.
Successful private markets investing requires disciplined execution and long-term thinking, the institute’s report said, particularly in areas where liquidity is limited and manager selection is critical. Trustee education was central to meeting these challenges, it stated.
