Overseas equity allocations take ‘centre stage’ in master trust investment strategies

LCP’s fifth annual Master Trusts Unpacked report, published today, highlights a shift in how master trusts are approaching their default investment strategies, with many increasing their exposure to overseas equities in recent years and, more recently, allocating to private markets.

In general, providers with greater allocations to US equities delivered the strongest performance in 2025. Growth phase returns for the year to 30 September 2025 ranged from around 12% to 20%, with an average of 14.6%.

However, LCP warns that while these higher allocations to overseas equities have driven returns, they have also increased exposure to market concentration risk. This is particularly noticeable in US markets, where a small number of large technology companies have driven a significant share of overall performance. LCP urges trustees to continue helping members understand that equity markets can be volatile over shorter periods.

Other key findings include:

• Private markets are becoming more common: Most providers are now including, or actively considering, private market allocations within their core default funds or through premium options. Approaches vary, with some incorporating small allocations in the default strategy and others offering alternative strategies with higher exposure.
• Investment design remains the key driver of outcomes: Differences in strategic asset allocation, glidepath design and diversification continue to lead to materially different member outcomes, particularly as savers approach retirement. It remains important for trustees to consider the concentration risks associated with these investments.
• Responsible investment is widespread: While all master trusts now integrate responsible investment principles to some degree, only a small number are progressing towards strategies that aim to deliver measurable real-world outcomes. Over the last year, more providers have introduced innovative approaches to expanding RI integration into asset classes beyond equities.

Edward Dixon, Partner in LCP’s DC practice, said: “The master trust market is changing fast, and providers are adopting a wide range of different investment approaches. 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.”