As UK pension funds report on their progress towards increasing their allocations to the country’s private markets, real estate is getting the lion’s share of the investment.
By Jack Arrowsmith, London
Following the signing in May 2025 of the ‘Mansion House Accord’ by a group of 17 UK pension providers, the first results have come in on their move towards greater private markets allocations.
At the end of last year, Mansion House Accord signatories held £22.1bn DC growth-phase assets in global private markets, or 6.6%, compared with £11.1bn, or 3.3%, in the UK, according to the ABI and Pensions UK. The ultimate goal is for those allocations to reach 10% and 5% respectively.
The signatories have also signed deals to invest a further £3bn in UK private markets. From the current UK allocations, they are overwhelmingly in property and real estate, which make up 72%, or £8bn, of the private markets investment from the signatories.
Included in that real estate allocation is social and affordable housing, historically a popular way to gain exposure for pension funds which a strong focus on impact investing. Private equity currently lags far behind at 4.5%, or £500m.
Since the signing of the accord, concerns have been raised that a targeted UK private markets allocation would find funds taking decisions that come at the expense of returns. That risk may be causing some to be more cautious before increasing their allocations to private credit or equity.
Earlier in the year a report by Isio, a pensions advisory firm, noted that among Mansion House signatories “there are still some reservations in moving away from more diverse global or European mandates”.
The body added that “a lot of providers are taking, in our view, the easy way out and focusing on UK property as a means to get a long way to the 5% target”.
The ease of property investment comes partly from the mature nature of the UK market, particularly when compared with VC and growth investing. Some of the participants already had developed real estate strategies.
The year prior to the accord, signatories Nest and Legal & General formed a £1bn UK build-to-rent housing partnership, alongside Dutch pension fund manager PGGM.
Real estate investments can provide predictable revenues, avoiding some of the J curve effects that investors normally face in private markets. With some projects able to deliver immediate returns, property becomes a much safer proposition for pension capital than VC or growth funds.
And for those that do have high upfront costs, such as build-to-rent programmes, the UK’s chronic housing shortage gives investors a reliable source of long-term demand, minimising any risk.
So while pension funds might meet the goals of the accords, it may not be in the way that was intended. The original announcement touted the deal as playing a part in “delivering growth finance to Britain’s world-leading science and technology businesses”.
The UK remains significantly under-capitalised when it comes to scaling businesses, which often rely on foreign capital to growth, increasing the risk of relocation. According to research by Dealroom, in 2025 only 25% of capital in late-stage funding rounds for UK startups came from UK-based investors, with 37.5% coming from the US.
With real estate making up the bulk of pension allocations, a flourishing of UK growth funding seems unlikely by 2030.
