Nuveen's recent nPOWERED event in London brought together senior investment decision makers, asset managers, policymakers and industry experts to examine the evolving landscape for private markets and alternative assets.
Five themes dominated the discussion, pointing to an investment landscape in which private markets and real assets are no longer peripheral allocations but core components of resilient, long-term strategies for pension schemes.
The U.K. is operating in a higher rate, higher inflation, higher risk environment, and the conditions that defined the post-GFC decade are unlikely to return. Base rates are markedly different from the 0.25%–1% range that prevailed between 2009 and 2022. The consensus opinion of attendees at the event suggests that a long-term 3–4% range for the ten-year gilt is now the more realistic planning assumption.
Globally, we also expect geopolitical shocks to remain a recurring source of market volatility. Such disruptions, together with the ongoing shift from globalisation to regionalisation, should spark a higher equilibrium level of inflation as efficiency gains from the previous open-trade era unwind.
The U.K. Productive Finance agenda is creating an expanding opportunity set for pension schemes with private capital expected to play a central role. The Mansion House Accord is targeting 5% of default defined contribution (DC) assets to be invested in productive U.K. assets by 2030.
Schemes are eager to participate in this agenda as real assets and private markets offer characteristics their portfolios require: long-duration, contracted, often inflation-linked cash flows and structural protections through covenants and security. However, government support and policy continuity will be critical.
U.K. pensions are at an inflection point. A generation of DC savers will soon be shifting from accumulating assets to requiring retirement income. Decumulation will require product innovation that delivers sustainable lifetime income. Part of the solution is expected to come from greater allocations to income-generating private markets and real assets, which the long-term time horizons of DC capital can support.
Another key theme was the maturation of investment grade private fixed income as a core asset class rather than an alternative or opportunistic allocation, with annual issuance now exceeding $120 billion. The investment case rests on durable, predictable income and covenant protection coupled with customisation aligned to specific liability profiles and premiums for illiquidity and complexity.
Higher energy prices are reframing the energy transition as an energy security and economic resilience imperative, rather than net zero ambitions. This is happening at a time when energy demand is widely expected to grow rapidly, driven by AI, digitalisation and electrification of transport and industry.
For U.K. schemes, this opens a durable opportunity set across four areas: clean power generation platforms combining renewables with storage; grid build-out and last-mile networks; energy efficiency and behind-the-meter solutions; and moving from clean fuel production to clean molecule production (such as sustainable fuels and biogas) for sectors that are hard to decarbonise through electrification alone.
Read full report here: Five themes shaping the U K investment landscape | Nuveen
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Sophie Ballard
Managing Director, Head of UK Institutional
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