DC Master Trusts are investing in private assets – are they ready to do it well?

With the Pension Schemes Act 2026 following as expected in the footsteps of the Mansion House Accord, it is now official: DC master trusts are going to get bigger (with a requirement to reach £25bn of assets) and more heavily invested in private assets (target 10% default allocation by 2030, subject to potential Government mandation).

Most large providers have both committed to, and commenced the process of reaching these goals, with TPR data from July 2026 data showing that 60% of master trusts already have some private market exposure.  Nevertheless, the goals are significant and proximate, creating the challenge of growing scale and governance capability in parallel.

Doing this effectively will not just be an investment challenge, but a governance challenge as well.

As highlighted by TPR in its September 2026 publication “Market oversight: UK pension funds - private market investment”, however, there remain significant barriers to effective private market investment – particularly in connection with governance.  Notably, TPR identifies a shortfall in knowledge and specialist skills across the trustee and advisor landscape, with such gaps between investment ambition and potential capability being a primary regulatory concern.

This article looks to explore some of the differences between effective governance for traded and private assets, and how trustees may look to address them.

Private investments are more than just illiquid equities

It is easy to see private market investment as a natural extension to investing in equity funds, particularly where trustees are using third party Long-Term Asset Funds (LTAFs). There are, however, significant differences when it comes to approach, risk and governance.

Investing in liquid assets is a well-trodden path for pension schemes, with clear parameters. Clear entry and exit pricing, quick trades and daily monitoring against benchmarks provide significant visibility over investment performance and permit adjustments to be made to both strategy and manager selection.

Private markets work differently, however. The illiquidity of investments means that entry decisions become critical, requiring a correspondingly higher level of assurance and due diligence to support decisions. Entry price and ongoing valuations reflect professional judgement rather than market pricing, and may also be subject to significant conflicts of interest, necessitating transparency and independent review. Underperformance is not always obvious and even once spotted, cannot be addressed through a quick exit.

Perhaps the biggest difference however, is that investment performance is deliberately shaped. The best private market investors do not simply pick assets and wait, but actively steward their investment, engaging with management, challenging strategy to drive growth, applying pressure when returns disappoint, and planning for contingencies long before they become crises.

In other words, successful private market investment requires a very different approach to be adopted by fund managers, which in turn impacts trustee governance and oversight. For DC schemes this is particularly important, as success goes directly toward member outcome. Good governance is critical not just to protect against downside, but to capture the full opportunity that private markets can offer.

Trustees’ accountability hasn’t changed, but governance needs to

All trustee boards delegate investment decisions to a lesser or greater extent, yet remain accountable for member outcomes. This gap is addressed by clear governance procedures, designed to ensure suitable trustee oversight of the investment strategy and execution.

With the shift to material investment in private assets, trustees need to ask themselves whether their governance and risk management structures remain fit for purpose. In particular, does their governance provide adequate assurance, visibility and control over how investments are identified, asset appreciation is driven, and assets are valued and exited by specific reference to the challenges of private assets noted above.

Private market governance requires a distinct approach. It needs to be more proactive, more robust and more specialised than existing arrangements for liquid assets. TPR’s own guidance acknowledges this, with its July 2026 Master Trust bulletin highlighting expectations that investment disclosures made to trustees will need to become more detailed in order to remain sufficient, consistent and robust, and subject to controls such as independent review and clear documentation. 

Better governance means better returns, not just better compliance

It is easy to fall into the trap of seeing governance as a compliance exercise, protecting trustees from risk and satisfying the regulator. Whilst this is certainly one benefit of good governance, it is far from the only one when it comes to private market investment.

Active, rigorous governance is the bedrock upon which private market investors generate strong returns.

Investment decisions are supported by thorough commercial and financial due diligence, ongoing performance is actively monitored to spot challenges or take advantage of opportunities, and risks are actively considered and mitigated.

Trustees looking to achieve private equity-like returns need to demand private-equity like discipline from their investment advisors and managers, with their own governance processes developed to facilitate and monitor this, taking advantage of natural points of leverage - such as manager selection – to get what they need.

The governance requirement varies by model – but applies to all of them

We have already seen a variety of approaches being adopted by trustees to facilitate private asset investment.

Some master trusts have committed to invest in third party investment vehicles, such as the British Growth Partnership or those offered by Schroders or Blackrock. Others are developing in-house investment capability, following the approach adopted by some of the largest institutional DB schemes such as RPS, USS and the PPF, whilst a third group are committed to using affiliated investment managers that sit within the same corporate group.

Each route will have its advantages and disadvantages, and each will bring its own governance challenges – whether that be manager selection and monitoring, conflicts of interest, concentration risk. Different approaches will even impact liquidity itself, with some routes permitting more flexible entry and exit criteria.

As a general rule, the closer the investment management function is to the trustees, the stronger the governance structure will need to be. Where master trusts are looking to build in-house capabilities – as is ultimately expected by TPR - there will inevitably be less independence and greater trustee accountability over decisions, requiring more robust processes, including independent review.

However, that does not mean other approaches are risk free. The use of affiliated managers (particularly if such use is exclusive) could lead to conflicts of interest or limited transparency over fees, whilst there are obvious concerns over transparency and control when using third party managers.

In each case, good governance – including robust, independent challenge – will be key to mitigating risk and maximising the likelihood of success.    

The window is shorter than it looks

The targets set for consolidation (2035), private asset investment (2030) and value for money (2028) may still feel distant, but they are not.

Building credible governance frameworks for private markets takes time. Boards need to assess existing skills and identify gaps. Liquidity risk management plans need to be commissioned or updated. Reporting frameworks need to be designed that can produce consistent, comparable data across private market managers. Independent review arrangements need to be put in place and tested before regulatory scrutiny intensifies.

TPR has confirmed its plans to supervise master trusts differently, segmenting them into four categories and allocating dedicated multi-disciplinary teams – with expertise in financial analysis, business strategy, investment and governance – to oversee the largest schemes.

In practice, the largest master trusts should expect direct, substantive interaction with specialist TPR teams on investment strategy, governance, and value for money – with regulatory intensity increasing as schemes grow and deadlines approach. In speeches to the industry, TPR’s chief executive has noted that several DC master trusts are expected to hold more than £50bn in assets within a decade, with some in excess of £100bn. Regulatory scrutiny will inevitably match that scale.

The upside of getting ahead of this is significant and trustees should be acting now to do so.

Where Grant Thornton can help

Governance frameworks for private markets, while more demanding than those for liquid assets, are not novel. The tools, skills and independent advisory relationships that master trusts need already exist. The question is whether boards deploy them proactively – before regulatory scrutiny intensifies and before problems surface – or reactively, when the cost of doing so is significantly higher.

Grant Thornton brings together capabilities across governance advisory, risk management, internal audit, financial due diligence, and valuations that are directly relevant to what DC trustees now need.

For trustees at the earlier stages of private market investment, we can help assess existing governance frameworks against the standards TPR is applying, identify gaps, and design independent oversight arrangements that are proportionate and credible. For those already invested, we can provide independent review of valuations, performance reporting, and manager governance – the kind of scrutiny that sits outside the investment consultant relationship and complements it.

For master trusts considering or developing in-house investment capability, our experience supporting private equity investors through the full investment lifecycle – from due diligence and deal advisory at entry, through ongoing monitoring and value management, to restructuring support and exit – is directly transferable to the pension context.

The Pension Schemes Act has set the destination and the investment engine is on its way. We can help you build the governance infrastructure that keeps your ambitions on track.