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 of the ‘Mansion House Accord’ by a group of 17 UK pension providers, major pension providers moved further towards growing their allocations in private markets.
At the end of 2025, 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.
In the UK, those allocations 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, which has historically been a popular way to gain exposure. Private equity currently lags far behind at 4.5%, or £500m.
But concerns have also been raised that a targeted UK private markets allocation would find funds taking decisions that mean they miss out on returns. The risk of this may be causing many to be more cautious in their increased allocations.
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 divers 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. Many of the signatories already had developed real estate strategies.
The year prior to the signing of 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 often avoid the J curve that investors normally face in private markets: property can often begin earning returns immediately.
While progress has been made towards the accords, it may not be in the way the UK government intended. The original Mansion House Compact, which preceded the accord and focused on a commitment to unlisted equities, was framed as a means to support the UK’s scale-up ecosystem, and clean energy startups.
As allocations increase towards that goal, they may end up missing the accord’s original purpose.
