Investment in unlisted equities within the defined contribution (DC) default funds of Mansion House Compact signatories has doubled over the past year to £1.6bn (€1.8bn), according to the Association of British Insurers (ABI).
The ABI’s data shows that the 11 pension providers backing the Compact – Aegon, Aon, Aviva, Legal & General, M&G, Mercer, NatWest Cushon, NEST, Phoenix, Scottish Widows and Smart Pension – have increased allocations to unlisted equities from £0.8bn to £1.6bn out of a combined £268bn in DC default funds.
This lifts exposure from 0.36% to 0.6%. Investment in unlisted equities across broader DC assets also rose to £6bn, based on data as of February 2025.
The Compact, launched in 2023, commits signatories to allocate at least 5% of DC default fund assets to unlisted equities by 2030. The ABI said firms are progressing through the complex operational steps required to embed private markets into DC strategies, including obtaining internal approvals and building suitable investment structures.
Over the past year, eight signatories established new partnerships with asset managers, while five launched or signed up to long-term asset funds (LTAFs) or similar vehicles with unlisted equity exposure.
However, appetite for such investments has fallen. Only four firms reported positive client sentiment towards higher unlisted equity allocations, compared with seven last year. The ABI said a continued focus on minimising cost over long-term value remains a key barrier to greater private market investment.
Stepping up efforts
In response, providers have stepped up efforts to educate clients and advisers about the diversification and long-term return benefits of private markets, through white papers, public events and direct engagement.
The City of London Corporation’s Employers Pledge initiative is also expected to help build employer support for long-term value considerations.
Jayesh Patel, head of UK DC distribution at L&G, welcomed the progress being made against the objectives of the Mansion House Compact.
He said: “As a business, we are committed to delivering better outcomes for savers through access to private markets.”
Patel pointed out that in 2024, L&G launched a Private Markets Access Fund that provides its 5.7 million pension scheme members with the ability to access the benefits of diversified exposure to private markets, while investing in tangible assets that can benefit the real economy.
“Continued momentum will depend on a robust policy environment coupled with innovative solutions from managers that meet the needs of pension schemes and savers, and we look forward to building on the progress made through strong engagement with our clients and partners,” he added.
Aviva’s My Future Vision strategy, launched this year, will allocate 20–25% of assets to private markets, including unlisted equities.
A spokesperson said: “Alongside Aviva Investors’ suite of long-term asset funds, including the newly launched venture and growth capital LTAF, this strategy reinforces Aviva’s commitment to the Mansion House Accord pledges: allocating 5% to unlisted equities and 10% to private markets in DC default funds by 2030, with 5% directed to UK investments.”
Pace needs to pick up
Michael Moore, chief executive officer of the British Private Equity & Venture Capital Association, welcomed the progress but warned that the pace “must increase significantly” if Compact signatories are to meet their targets.
“Bold action is needed to accelerate this progress, so that pension savers can benefit from more diversified portfolios and the stronger returns private capital can deliver,” he said.
Moore said that increasing the availability of domestic capital could help fast-growing UK businesses continue their growth trajectory and increase the chances of them choosing to stay in the UK for the long term.
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