One in 10 (10 per cent) UK defined contribution (DC) pension schemes are not likely to consider investing in private markets, according to a poll conducted at the PLSA Investment Conference 2022.

The poll conducted during the session ‘Next generation default for DC’ also found that nearly a quarter (23 per cent) of DC schemes had already incorporated private markets into their portfolios.

Almost half (48 per cent) were thinking about investing in private markets, 16 per cent were beginning to incorporate them, and 3 per cent were midway through incorporating them.

When asked what the key driver was for incorporating private markets into their DC portfolios, more than half (55 per cent) of respondents cited higher risk-adjusted returns over the long term.

Over a quarter (27 per cent) said enhanced portfolio diversification was the key driver, 6 per cent cited client/member demand and 5 per cent said it was protection against inflation.

Almost one in 10 (8 per cent) said that there was nothing compelling enough at the moment for them to name a key driver for incorporating private markets into their portfolios.

“When we are trying to take a portfolio at a point in time and see if there an improvement of either the return or risk-adjusted return, and there is evidence to suggest that when we looking back at the assumptions of private markets, the inclusion in a portfolio can be additive,” said BlackRock head of EMEA DC strategy, Dominic Byrne.

“But I think the key point for DC members is not that there is a single private market allocation that will improve their portfolio, it is about the type of private markets and when.

“Private equities, for instance, helpful in the early growth phase and then bringing in more cashflow assets as you get closer to retirement to think about more diversification.

“We are not just simply thinking that private markets will enhance the portfolio, it’s about what type of private markets you need."

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