Signatories of the Mansion House Compact have maintained steady progress on their commitments, an update from the Association of British Insurers (ABI) has revealed, although support for increasing investment in unlisted equities from clients has decreased.

The ABI's update revealed that investment in unlisted equities held through defined contribution (DC) default funds has doubled since last year, growing from £0.8bn to £1.6bn.

According to the ABI's update, there has been a growth in funds’ exposure to unlisted equities from 0.36 per cent to 0.6 per cent, helping to push closer to the compact’s ambition to allocate at least 5 per cent per cent by 2030.

The compact, launched in 2023, is a voluntary, industry-led initiative supported by 11 major pension providers and the City of London Corporation.

The ABI explained that firms have taken several additional steps to help them progress towards the initiative’s goals, revealing that the majority (eight) of signatories have established new partnerships with asset managers in the past year, with a view to invest in private markets.

In addition to this, just under half (five) of the signatories launched a new long-term asset funds (LTAF) or a similar vehicle with exposure to unlisted equities or signed up to partnerships to offer one.

"This year’s progress is testament to the continued efforts of the Mansion House Compact signatories to deliver better results for savers by investing in unlisted equities," ABI director of long-term savings policy, Yvonne Braun, said.

“Signatories have taken important additional steps, including making necessary changes behind the scenes, to reach the compact’s goals. Changes to asset allocations take time, with many steps and approvals before capital can be deployed.

"Having made progress on the early stages in the first year of the compact, we’re seeing this gain momentum in the second year.”

However, the ABI argued that, to enable signatories to deliver the compact, the entire decision-making chain, from trustees to employers and advisers, needs to transition from a cost-focused to a value-focused approach.

It also revealed that, despite the progress seen so far, support for increasing investment in unlisted equities from clients has decreased year on year.

Just four signatories reported positive client sentiment, down from seven last year, due to a focus on minimising costs instead of maximising long-term value.

Given that this lack of backing could see a limited proportion of capital allocated towards unlisted equities, the ABI confirmed that providers are intensifying efforts to make the case for private market investment with clients, through educational initiatives and public engagement.

It also suggested that the value-for-money framework, set to come into force in 2028, is expected to play a "pivotal" role in enabling this shift.

Braun added: “While firms are doing what they can to educate and inform clients about the long-term benefits of such adjustment, we need continued policy support and a cultural shift across the entire value chain to value over cost alone.

"We’re working closely with the government and regulators to ensure the Value for Money framework is designed and implemented successfully, and look forward to seeing further progress on this.”

British Private Equity & Venture Capital Association (BVCA) chief executive, Michael Moore, also stressed the need for more to be done, stating: “Increasing UK pension fund allocations to private capital is welcome, but it is clear the pace must increase significantly for Mansion House Compact signatories to meet their commitments.

“Bold action is needed to accelerate this progress, so that pension savers can benefit from more diversified portfolios and the stronger returns private capital can deliver.

“Getting more pension investment into fast-growing businesses could be a game-changer for our economy. Increasing the availability of domestic capital could help these companies continue their growth trajectory and increase the chances them choosing to stay in the UK for the long-term.”

This update only covered the progress made towards the Mansion House Compact, not the Mansion House Accord, which is a separate voluntary pledge that includes a broader set of asset classes and contains a UK-specific ambition.

The ABI and Pensions UK will work together to track progress of the accord, based on the asset allocation data to be collected by the regulators.

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