WTW’s ill-fated merger with Aon, announced at the outset of the pandemic in early March 2020, would have shaken up the corporate insurance brokerage market. It would also have created an outsourced CIO (OCIO) giant to compete with Mercer in terms of delegated assets under management (AUM).

Mark Calnan

Mark Calnan

● 2020 to present –    Head of investments, Europe, WTW
● 2015 to present – Head of specialist solutions, WTW
● 2014 to present – Head of strategic development, investment, WTW
● 2009-17 – Global head of private equity, WTW
● 2004-09 – Investment consultant, WTW

●  Delegated AUM: $180.4bn (€159bn); 30.9.21
● Delegated AUM in Europe: 60-65%
● Lifesight (UK DC Mastertrust): £12.5bn (€15bn)
● Alliance Trust global equities mandate: £3.7bn AUM 


In the end, regulatory concerns about competition in European insurance brokerage rather than delegated investment killed the tie-up last summer. For the investment and consulting groups at WTW (formerly known as Willis Towers Watson) and Aon, the death of the merger restored much needed certainty.

For WTW, this means renewed focus on its Investment 2025 plans. Sustainability advice will be a core of this programme – implementing TCFD reporting or implementing net-zero strategies, for example. 

Europe, and the UK in particular, is of particular interest to WTW. Europe accounts for as much as 65% of AUM and around half of the 1,000-strong investment headcount.

WTW wants to expand geographically in Europe and is hiring people in markets like Germany, Ireland and Spain, where it has an extensive pension client base.

Another target is diversification of asset owner clients – serving more mass-affluent individuals, for instance, as WTW already does with its UK defined contribution (DC) master trust LifeSight. 

WTW’s mandate to run the £3.7bn (€4.4bn) London-listed global equity multi-manager investment vehicle, Alliance Trust, already allows ordinary UK investors to tap its manager-selection capabilities.

Now the firm wants to put other areas of its investment expertise in front of a wider audience. WTW was early in drawing clients’ attention to the benefits of the illiquidity premium and it has built up considerable resources in private markets.

Unlocking the illiquidity premium for DC pension members is a new frontier in institutional investment and one not without its challenges. It is a task that excites Mark Calnan, Europe head of investment, who joined WTW as a graduate and worked for a number of years in private markets, including as head of private equity from 2009-17.

He says: “We think about it as a structural premium, but also access to manager skill that locking your capital up allows you to have in a more simple way. Those things we think are structural things happening across the investment markets, and ones that will continue.

“I’m less worried about our capability in that area; I’m more worried about the delivery mechanism, and we need to innovate on that front.”

LifeSight is one place Calnan’s team can implement illiquid strategies. Now that its assets stand at around £12.5bn, it has achieved the critical mass to accommodate a sizeable private markets allocation in private equity, say, or infrastructure.

First and foremost,  private markets strategies are difficult to implement in an environment with daily fund dealing, as is the case with UK DC pensions. 

Experiences with open-ended property funds and latterly the Woodford collapse have brought these shortcomings home. Theoretically, a cashflow-positive DC scheme should have enough liquidity to meet redemptions without selling underlying illiquid assets. But it’s not quite that simple, of course.

“Is there a middle ground where you can find a version that works for DC, but that keeps the benefits of traditional private markets type investing as well?” Calnan asks. “That’s what we are in the midst of exploring.” It is an area that others, like the UK’s NEST multi-employer auto-enrolment scheme, are also considering.

Calnan points out that structuring is complex in DC because of the uncertainty around the size of the asset pool and the allocation. In other words, the less certainty there is on how big an asset pool is going to be in a given time horizon due to uncertainties over the inflows, the harder it is to sequence the allocation.

Here, LifeSight is in some ways a victim of its own success. Although it has grown in assets to a size where its trustees can consider implementing illiquid assets, its cashflows have nothing of the certainty of a defined benefit (DB) scheme’s. One employer transfer, by Vodafone in 2020, increased assets by £1.4bn in one go in what was thought to be the largest single transfer of an unbundled DC scheme into a master trust.

Simply put, suddenly having to transition assets at that scale can seriously set a private equity programme off course. 

“If you’ve got a structure that gives you less certainty on the size, you’ve got questions around how you size things at the beginning; how will you grow so those investments remain meaningful? These are all structuring questions that we’re considering at the moment but that give you an example of the complexity.”

The point about the illiquidity premium is that it is scarce in the first place, which can mean not having enough of it to go around when good opportunities arise.

One idea is to allow LifeSight access to co-investment opportunities – the exclusive ‘don’t call us we’ll call you’ high end of private markets, usually reserved for the most sophisticated investors. 

As LifeSight grows, Calnan and his team will also have the useful problem of allocating private market co-investment opportunities fairly. WTW already implements co-investments for larger fully delegated fiduciary or OCIO clients – although not for advisory clients, given the speed with which investors need to act to be taken seriously in this area.

Calnan elaborates: “The reason why traditional co-investment funds would raise a blind pool of capital is certainty. They know how much money they need to invest. They might raise a billion dollars and invest in 50 underlying transactions. That means they need each investment to be $20m, so from day one, they can size appropriately.”

In this regard, Calnan draws attention to the existing allocation process for clients: “That means when we have an idea, whether it’s a co-investment or a fund investment idea, portfolio managers responsible for those respective areas have a process by which they say, would I want this in the portfolio or not? 

“That might mean a commingled fund or an individual tailored client account because if it’s delegated we see it all as one thing.

“Then we size it appropriately. We size our demand appropriately and if there’s any scale back, everyone gets scaled back pro rata.”

At a time of volatile markets and poor return outlooks across many asset classes, getting private markets opportunities in front of ordinary DC pension members will be a considerable feat – if it can be done successfully.