Overseas equities have moved firmly into the spotlight within master trust default investment strategies, according to the latest Master Trusts Unpacked report from LCP.

The consultancy’s fifth annual report revealed that many master trusts had increased their exposure to overseas equities in recent years, and a growing number had begun allocating to private markets.

LCP noted that master trusts with higher allocations to US equities delivered the strongest growth-phase performance in 2025.

Returns over the year to 30 September 2025 ranged from around 12 per cent to 20 per cent, with an average return of 14.6 per cent.

LCP observed that equity-heavy strategies, particularly those with greater US exposure, benefited from strong performance among large technology and AI-related stocks.

However, the report warned that these higher allocations had also increased exposure to market concentration risk, particularly in US equity markets, where a small number of companies accounted for a disproportionate share of returns.

LCP stressed that this reinforced the importance of trustees continuing to help members understand that equity markets could be volatile over shorter periods, despite strong recent performance.

Meanwhile, the report also highlighted a growing focus on private markets within master trust defaults.

Most providers were now either including private market allocations or actively considering them, either within core default strategies or through premium options.

Approaches varied, with some schemes incorporating relatively small allocations and others offering alternative strategies with higher exposure.

LCP found that differences in investment design remained a key driver of member outcomes, with variations in strategic asset allocation, glidepath design and diversification leading to materially different results, particularly as savers approached retirement.

The consultancy said trustees should pay close attention to concentration risks when reviewing default strategies.

Responsible investment integration was also widespread across the master trust market, although the depth of implementation varied.

While all master trusts integrated responsible investment principles to some extent, only a small number were moving towards strategies designed to deliver measurable real-world outcomes.

Indeed, over the past year, more providers have extended responsible investment approaches into asset classes beyond equities, including fixed income, infrastructure and private markets.

LCP partner, Edward Dixon, argued the findings underscored the importance of robust investment design.

“The master trust market is changing fast, and providers are adopting a wide range of different investment approaches," he said.

"With so much variation, a well-thought-out investment design is crucial to securing good outcomes for members.

“It is important to look closely at how each strategy is constructed, what risks it introduces, and whether it will continue to deliver in different market conditions.”

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