This article was published in partnership with Blue Owl Capital.

This article was published in partnership with Blue Owl Capital.

Asset owners are crying out for bespoke solutions to address their unique and evolving needs, yet many private market managers continue to squeeze them into generic closed-ended funds. Such structures are outdated and face extinction, according to James Clarke, global head of institutional capital at Blue Owl Capital.

When it comes to raising money, private market managers have had it relatively easy.

The culmination of multiple factors, including heightened economic and geopolitical uncertainty, rising inflation, shrinking public market opportunities, innovation in technology, and an under-allocation to private assets, have resulted in a fantastic decade for private market managers.

The global private market investment sector has surged to over US$24.4 trillion from around US$9.7 trillion in assets under management in 2012, according to EY Global, as asset owners have bolstered their allocations to private equity, private credit, and infrastructure in an effort to generate alpha and build more diversified, resilient portfolios.

And there’s more investment to come.

A recent survey of leading global limited partners (LPs) conducted by consultant McKinsey found that investors plan to allocate more capital to private markets in the near term.

However, the dynamics are changing, and managers need to wake up to the bespoke needs of their clients.

Fundraising across all private asset classes has become more challenging, with investors demanding greater value, flexibility and stronger alignment of interests.

At the same time, private market managers are grappling with fresh headwinds including competitive pressures, narrowing exit options, and heightened regulatory scrutiny.

McKinsey’s 2025 Global Private Markets Report described dealmaking conditions in more recent times as “tepid” and “likely to remain uneven”, as managers adapt to an industry in “transition.”

“Fundraisers are looking beyond closed-ended channels to raise capital in new vehicles, such as evergreen funds,” the report stated, adding that investors are moving away from passive allocations and seeking to invest directly or co-invest in assets alongside GPs, and actively engage companies.

This transition was inevitable.

Traditional closed-ended structures, which pool and lock money up for a fund’s lifecycle, are not optimal for many institutional investors, particularly large allocators.

Illiquidity aside, there’s little-to-no ability for investors to influence underlying investment and management decisions.

Additionally, there are question marks over whether client service is meeting the mark. And the level of service in general needs to improve, in my opinion.

Take it or leave it

Closed-ended funds are still the dominant vehicle for accessing private markets, but their generic, one-size-fits-all nature is hardly befitting of some of the world’s largest asset allocators.

Globally, institutional investors, including pension funds, sovereign wealth funds and endowments, manage an estimated US$58.5 trillion, according to the Thinking Ahead Institute’s Global Pension Assets Study. They are all different and unique, reflecting their membership, and they deserve to be treated that way.

Conversations with a Californian defined benefit fund will differ wildly to a UK defined contribution fund, highlighting the irrelevance of a single, one-dimensional solution for both.

Customisation should be table stakes, as it is with most other goods and services, from cars to legal advice and I would argue, institutional public market investments.

Private market managers have historically been largely immune. Ironically, it is their success and the growth of private market assets over the past decade that is driving change and progress.

Active listening and active management

Private market managers need to actively listen and respond to client demands for bespoke solutions that meet their specific circumstances, requirements and objectives.

They need to lift service standards significantly and innovate to reflect the fees that they earn, and the trusted, respected relationship that asset owners expect from their service providers.

If they don’t act swiftly, the trend suggests that more institutional investors will bring private assets inhouse.

Asset owners themselves are growing and maturing. They are reshaping their teams, expanding their investment capabilities, and expecting more from their partners.

Private market managers also need to evolve to better serve and cater to the needs of their clients. They can’t rely on traditional fund structures, given their limitations, or a drop in and out service mentality. Instead, they should build bespoke solutions that offer more control, flexibility, and optionality – approaching every client engagement as a true partnership.

The Principles for Responsible Investment (PRI) will reduce signatories’ responsibilities in their annual mandatory reporting, as the UN-backed body looks to stay relevant amid a surge of new responsible investment codes and standards.

The reporting framework will be slashed to consist of just 40 questions, down from the current 240 and will come into force next year. 

Outgoing PRI chief executive David Atkin says the change recognises that investors bear too much administrative burden around ESG disclosures but promises that the simplified assessment will be just as rigorous. 

“The overhead [in our reporting] was disproportionate to the value of the effort,” he tells Top1000funds.com in an interview before he officially stepped down on December 1. Atkin will remain at the PRI as an advisor until April 2026. 

“The reporting system has been very important, and it’s been such a critical element of the growth of responsible investment around the world, but at a time when there are now so many other mandatory requirements and voluntary codes, our signatories were drowning under the amount of work they had to do.” 

Atkin said the new assessment will remove more “granular” questions such as those on the asset class and strategy levels, and will instead focus on organisational level commitments such as how ESG is incorporated into governance and investment analysis.  

A new concept that was introduced into the new reporting framework is the so-called three-pronged “PRI pathways”, which essentially allow signatories to choose an ESG approach to align with. They can choose to incorporate ESG factors in their investment approach, address sustainability-related financial risks, or pursue positive impacts. 

Atkin does not see this approach as putting the reporting system at risk of being gamed. Instead, it could offer better insights for asset owners who may want to see if a manager has an aligned responsible investment approach.  

“I think that’s much more useful information than trying to get all of that through the [old] assessment, which is one size fits all and just frustrates everybody,” he says.  

There have been some volatile sentiments around responsible investments, particularly in the US due to the Trump administration’s hostile stance against ESG principles.  

This September, the US Employee Benefits Security Administration, which oversees $14 trillion of the nation’s private retirement assets, labelled the OECD’s responsible investment principles for pension funds “nothing but a Marxist march through corporate culture” and said it will no longer support such policies. [See US Department of Labor slams OECD on ‘Marxist’ ESG policies]. 

Asset managers which were public supporters of responsible investment also had to work hard to win back or retain mandates from US public funds, such as the $11.5 trillion BlackRock which was removed from Texas politicians’ blacklist only after it dropped out of Climate Action 100+ and the Net Zero Asset Managers alliances. [See Texas politicians reinstate BlackRock as manager’s ties to the state grow]. 

The role of asset owners 

Atkin says asset owners can play a bigger role in stabilising the discussion around responsible investments.  

“If asset owners are consistent in signalling to the marketplace that responsible investment remains relevant and that they will reward those managers who are aligned with mandates and incentivised around working on those [responsible investment] areas, the political stuff will just take care of itself,” he says.  

Atkin has seen discussions around ESG flip during his time at the PRI. When he joined PRI in 2021, investors were living through peak “ESG”. Stronger recognition around climate change and social unity, alongside a positive geopolitical environment, contributed to the tailwinds around responsible investment post-COVID.  

But soon after, the Russian invasion of Ukraine and the inflation-fuelled cost of living crisis have given a voice to populist politicians, which included climate denialists.  

Despite the pushbacks, Atkin says the green energy transition will not change direction as its logics are rooted in economics, not politics. 

“It is unstoppable,” he says. “In a world where we now need to create more energy capacity to deal with AI and data centres… when you look at the comparison between the cost of building renewables compared to fossil fuels, it’s very clear that renewables are the more economical solution. That’s got nothing to do with politics.” 

“If you believe the science, and you are suddenly stopping work [on responsible investment] because the politics have got difficult for you, then you are not performing your fiduciary responsibility. 

“In fact, I think you’re exposing yourself to litigation risk.” 

In December, Atkin returned to his home country of Australia and will support interim chief executive Cambria Allen Ratzlaff in an advisory capacity until April 2026. PRI lifted the number of signatories from 3,000 to more than 5,000 during his time as the chief executive.

Before that, Atkin spent 15 years on PRI’s board between 2009 and 2015, which is why he anticipates ongoing contributions from Asia Pacific to the organisation even though he has left the executive post.  

“As an industry, if you’d said five years ago that we would have more than 50 per cent of the world GDP covered by sustainability standards, I would have said you were dreaming,” he says. 

“But that’s where we are right now, 60 per cent of the world are in the process of adopting ISSB standards.” 

Most importantly, emerging markets are upping their game in creating sustainable investment opportunities with “pragmatic” policymaking and “institution-oriented” governments, which is crucial as they account for a significant portion of the global population.  

“You could say one sign of success is that we’re not needed. But I think there’s going to be an ongoing need for an organisation like the PRI because you’ve got people continuing to go on their learning,” Atkin says.  

“I’m really proud of the fact that we’ve been able to navigate this complex environment, introduce new and better value to our signatories, and reinvigorate our relationship with our asset owner community. 

“There has been a lot of time invested, but I’m really excited about the future.” 

In a rare interview, Jayne Atkinson, chief investment officer of the £100 billion ($132 billion) UK pool LGPS Central, reveals the plan to scale up its offering after almost doubling its assets under management, including expanding alternatives to new allocations in hedge funds, diversified growth funds and insurance-linked securities.

With the sweep of a pen, LGPS Central, one of the United Kingdom’s Local Government Pension Scheme pools, has become a £100 billion ($132 billion) asset manager.

Following the government’s pursuit of economies of scale in public sector pensions, it axed two pools, ACCESS and Brunel Pension Partnership, and forced their underlying pensions funds to choose other pools.

LGPS Central has proved a popular choice, attracting six new client funds to bring its number of partner funds to 14 and nearly double its assets under management.

It requires “thinking and acting like a £100 billion asset manager” with more service offerings and a boosted exposure to asset classes and expertise CIO Jayne Atkinson, who joined LGPS Central six months ago, tells Top100funds.com.

“I wanted to join an LGPS pool that’s on the way up,” she says.

Under pressure to pool

Government policy has also put a renewed emphasis on pooling whereby partner funds transfer assets to LGPS Central. Policy makers want all LGPS assets to be pooled by March 2026, although that mandate does allow “limited flexibility” for pension funds moving to new pools.

LGPS Central’s pooled assets have grown from £19 billion in 2022 to around £50 billion today, but around £18 billion remains managed by partner funds through their existing arrangements. These include both active and passive strategies with external managers, across public and private markets.

“We have already started the transfer of these legacy assets. We are also in advanced discussions with new partner funds to understand their current asset strategies and work has started to formulate plans to transfer these assets across too,” says Atkinson.

As the pace quickens, she says her key focus is on developing stakeholder relationships, meeting new partner funds and attending the different pension committee meetings that range in size and sophistication with different needs and levels of diversification. Positively, she’s encouraged by the sense of collaboration between the funds, and how existing partner funds got behind LGPS Central’s bid to inherit new ones.

“We have been touched by how existing partner funds worked with us to inherit new ones in a truly collaborative exercise.”

In recent months she has made internal decision-making processes more efficient, including streamlining the manager line up in the pooled fund offerings. She is also building up the internal investment team to accommodate new partner funds, focused on recruiting mainstream asset managers from the external market place.

“We’ve already attracted some great hires,” she says. “It’s wonderful to see experienced household names come through the door.”

willingly taking compulsory advice

Policy makers have also ruled that  local authority pension funds take investment strategy advice from their respective investment pools. LGPS Central already provides investment advice to some of the partner funds, but in line with government policy has boosted its advisory offering in time to provide comprehensive investment strategy across all nine asset buckets, and asset liability modelling, from next spring.

“From next April, it will be compulsory for partner funds to use our advisory offering, but we want them to willingly come to us for advice and so we are working together with them on what that offering could like in the future,” she says, explaining that the individual administrative authorities will continue to decide each fund’s overall asset allocation, the major driver of overall returns.

Private markets push

LGPS Central’s existing  private markets offering is spread across OECD countries with around a quarter weighted to UK assets. Allocations span private equity, private credit, infrastructure and property, and each bucket has several closed and open-ended funds with different risk-return profiles and strategies.

This will expand to new allocations to hedge funds, diversified growth funds and insurance linked securities as well as hedging assets by April next year.

“Alternatives are one of the government’s nine asset class buckets, and we want to make sure we are ready to accommodate that next year,” she says, adding that these allocations won’t necessarily be run in-house. “We expect to in-house more investments where it is deemed cost effective, but we may also outsource if it’s not cost effective to keep the allocation in house. It’s a two-way street.”

LGPS Central is also building a new, three-person internal investment team focused on local investment in a strategy that aligns with government policy to invest more at home. Atkinson says she doesn’t want it labelled impact investment.

“The reason is, we are conscious of our members underlying need for a financial return and we are very keen to supply that financial return. These are not charitable investments, and we expect a risk adjusted return going forward.”

Norway’s massive sovereign investor, Norges Bank Investment Management, has surpassed Japan’s pension whale Government Pension Investment Fund to become the world’s largest asset owner for the first time, according to a new report by the Thinking Ahead Institute.  

NBIM, which was established to manage revenue generated from Norway’s oil reserve in 1998, has assets of KR20,440 billion ($2 trillion). At the time of the report, which measures assets at the end of 2024, it reported assets of $1.7 trillion, leapfrogging GPIF with $1.6 trillion. 

Chinese sovereign wealth funds took out third and fourth place, with SAFE Investment Company and China Investment Corporation, respectively holding assets of $1.4 trillion and $1.3 trillion according to the report. 

The fifth and final fund with assets above the trillion-dollar mark is the United Arab Emirates’ sovereign investor, Abu Dhabi Investment Authority ($1.1 trillion), according to the Thinking Ahead Institute. The report extracts AUM information and estimates from annual reports, regulators, third-party consultants and direct communications with organisations.  

A unique attribute for a fund the size of Norges Bank is that it has also been named the world’s most transparent fund by the Global Pension Transparency Benchmark, marking a rare combination of size and openness. 

On a country level, the US remains the biggest institutional market with 28 per cent of the assets from the top 100 asset owners, followed by China with an 11 per cent share and the United Arab Emirates with 7 per cent.  

Director at the Thinking Ahead Institute, Jessica Gao, noted that there are five wealth “clusters” forming in the US, Canada, Europe, the Middle East and Australia.  

“These pools of asset owners… collectively manage around $13 trillion and are shaping the direction of institutional investing, setting global investment trends, governance practices, and sustainability standards,” Gao said in a media statement.  

A well-known group among them is Canada’s Maple 8, which have been trailblazers in the internalisation of investment management and allocation to private markets, enabled by their rigorous fund governance.  

But the biggest cluster identified by the report is the ‘Euro 9’, which consists of NBIM, the Netherlands’ APG, PGGM, and MN Services N.V., France’s CDC, Sweden’s AP7, Germany’s Bayerische Versorgungskammer, Denmark’s ATP and the UK’s Universities Superannuation Scheme.  

In a further extension of the acronym, the US boasts what the Thinking Ahead Institute is calling the ‘Public 7’, which is made up of seven state and federal-level pension funds, including the $954 billion Federal Retirement Thrift.  

But the ‘Gulf 5’ in the Middle East and the ‘Super 6’ in Australia were deemed “less mature” clusters, even though the former collectively manages close to $3.9 trillion in assets. The Australian pension is a relatively young system – only 33 years old – but has huge growth potential because it is a compulsory system. 

The report determined these clusters by exercising an AUM limit and while these funds operate in their own regional context, the report identified commonalities, including a total portfolio thinking, a focus on resilience and a willingness for investor partnerships. 

As these funds grow, they need to address talent, culture, governance, and leadership as separate factors but also issues at the intersection of them: joined-upness in teams, work flexibility and networks, for example, the report said.  

“The funds have expressed concern that often events progress faster than their organisations can react. They are aware that kneejerk responses that are not fully-formed will not advance their cause,” the report said.  

“The funds’ CEOs and CIOs are impressive in their inner-outer thinking here – cultivating infacing-savviness – such as authenticity, self-awareness, critical thinking, visionary insight, and emotional intelligence. And outfacing agility – acting as ambassadors, authoritative voices, collaborators, diplomats, and experts.” 

Another trend the report identified among asset owners is the increasingly sophisticated use of technologies such as artificial intelligence, but highlighted that most allocators’ use-cases orient towards oversight, decision-support, and governance.  

It says this is a reflection of smaller internal teams in asset owner organisations and their reliance on asset managers in day-to-day investment implementation. 

“AI has a particularly attractive use case for asset owners in integrating data by blending existing knowledge and beliefs with various fresh data sources and context to reach new levels of decision-useful intelligence,” the report said. 

“[But] given the reliance asset owners place on asset managers for technology and data infrastructure, it is increasingly important that the asset managers stay ahead of the curve in adopting these tools.” 

The Swedish government’s plans to streamline the country’s pension system and merge private equity-focused buffer fund SEK 77.1 billion ($8 billion) AP6 with its larger, diversified sibling SEK 458 billion ($48 billion) AP2, has hit a bump in the road.

In the latest to-ing and fro-ing, AP2 has defended the government’s recent proposal to sell off the majority of AP6’s private equity portfolio but the strategy has – predictably – drawn fierce criticism from AP6, warning that it could knock billions off returns over time.

The policy document proposes that around SEK 47.5 billion ($4.9 billion) of AP6’s private equity funds and co-investment assets go into a transition portfolio that will be sold off gradually over time and re-invested in low-risk investments. It means only around 40 per cent of its portfolio will be combined into AP2’s long-term private equity allocation.

In a particular point of contention, the report suggests AP6’s SEK 24.3 billion ($2.5 billion) allocation to 85 co-investments with 25 managers also goes into the transition portfolio – a strategy AP6 chief executive Katarina Staaf has predicted could contribute to losses of as much as SEK 70 billion ($7 billion) in returns over the next decade.

“Placing more than half of AP6’s assets in the transition portfolio means much of the expertise on private equity that AP6 has built up over almost three decades will no longer benefit the Swedish pension system. A recent successful example of our co-investment program was the medical technology company Asker Healthcare. AP6 sold its holdings in the company a couple of weeks ago at a profit of more than SEK 4 billion ($0.42 billion),” said Ulf Lind Lindqvist, head of communications at AP6.

But Eva Halvarsson, CEO of AP2, tells Top1000funds.com she doesn’t want to increase AP2’s allocation to private equity beyond 15 per cent, and co-investment is unlikely to increase returns. She argues AP6’s estimated losses don’t consider AP2’s mission to manage a diversified portfolio, or take into account the high-risk nature of the asset class.

“In our view, the analysis put forward by AP6 is based on several misinterpretations,” she reflects. “It does not consider the fundamental prerequisite that AP2 has an unchanged mission as a diversified pension fund, nor does it take risk into account. Private equity investments offer high expected returns but also entail higher risk compared to many other asset classes. AP2’s mission is to manage the Swedish people’s pension capital responsibly, with consideration for both return and risk.”

She adds that AP2 has only just conducted a comprehensive ALM analysis, which concluded that a strategic allocation of 15 per cent to private equity is appropriate.

“This is a high proportion compared to other pension funds globally and a higher allocation would improve expected returns slightly but would also significantly increase risk, thereby reducing the risk-adjusted return.”

Halvarsson also questions the value of co-investments.

“Co-investments demand substantial resources and contribute to heightened portfolio risk. For perspective, AP2 has achieved comparable returns in private equity, without co-investments.”

She says AP2 will manage the transition portfolio with the same “diligence, professionalism and care as its existing private equity portfolio” and the focus will be on “creating value and generating liquidity over time, without accelerating divestments”. She reflects on the “valuable work” AP6 has done building the portfolio, but also stresses AP2’s long track record and skill in the asset class.

“AP2 has more than 20 years of experience in private equity investments.”

Still, tempers are running high.

The report rebuked AP6 for not cooperating with the merger process, citing the fund’s “unwillingness to cooperate on issues that are central to the inquiry”, causing a “delay in the inquiry’s work [that] has also affected the opportunities and conditions for AP2 as a recipient organisation.”

And Halvarsson won’t give any hard assurance that AP6 staff will be incorporated into AP2.

“Given the increased size of funds managed, AP2 is currently hiring for a number of different positions, which are open for anyone to apply. It is too early to say how many will come from AP6.”

Around 25 employees across more than 10 different functions are currently involved in managing AP2’s private equity portfolio.

Merger mania continues to grip Iceland’s pension sector as the country’s pension funds seek lower costs, higher returns, operational efficiencies, and the scale to better negotiate with asset managers.

The ISK 190 billion ($1.5 billion) Lífsverk Pension Fund and ISK 477 billion ($3.8 billion) Almenni Pension Fund are the latest duo to sign a merger agreement, which will create a new operational fund by January 2026.

At the end of this year, ISK 562 billion ($4.4 billion) Frjálsi Pension Fund and dental pension fund ISK 11 billion ($87 million) LTFÍ Pension Fund will also merge. Elsewhere, ISK 557 billion ($4.4 billion) Brú Pension Fund has taken over Akureyri Employees’ Pension Fund (LSA), following its earlier merger with the Reykjavik City Employees’ Fund.

The sector’s steady consolidation means the country has 21 pension funds today compared to 96 in 1980.

But consolidation doesn’t solve growing concerns recently flagged by the OECD and Iceland’s Central Bank about the size of the country’s pension funds relative to the economy. Iceland’s pension funds’ combined assets are now larger than those of the country’s banking system and insurance sector combined, and more than sufficient to buy all listed equities, bonds and bills in the country.

Pension fund assets reached almost 200 per cent of GDP by the end of 2022, up from around 150 per cent in 2018. The OECD states that pension funds are a major source of household mortgage lending; they are the largest investors in the domestic equity market and are among the largest owners of two of Iceland’s three systemically important banks.

Moreover, Iceland’s pension funds typically target a real reference rate of at least 3.5 per cent on their assets, typically above economic growth. The OECD flags that in a low-yield environment, pressure for returns could push pension funds into riskier asset classes and warns that authorities should closely monitor pension funds’ risk-taking, including through stress tests.

Central Bank urges pension fund reform

In 2022, pension fund reform allowed funds to gradually increase their holdings of foreign assets to 65 per cent, reducing exposure to Iceland’s small and volatile economy. But Iceland’s Central Bank is now urging for more reform of the Pension Fund Act, arguing that legislation governing the sector has fallen behind reforms in other parts of the financial system.

The Central Bank noted that while consolidation has brought economies of scale, it also raises challenges for how pension funds are managed and the extent to which they should be able to exercise influence as shareholders in Icelandic companies. It urged for more stringent requirements for board composition, risk-management frameworks, internal audit, compliance functions, and outsourcing oversight to reflect the systemic role of pension funds.

“Increased concentration undeniably brings a certain economy of scale, but at the same time it brings challenges involving, for instance, how pension fund management should be conducted and how assertive the funds should be in their role as company shareholders,” writes the bank. “In terms of total assets, Iceland’s pension funds are larger than the Icelandic banking system and insurance companies combined.”

Iceland’s three largest funds manage around half of the country’s total pension assets and the 15 largest manage 97 per cent.

The bank forecasts more pension fund investment within Iceland and abroad. It warned that foreign investment can entail challenges to financial stability, but pension funds should consider the potential impact on the balance of payments when investing abroad, so that they neither create nor exacerbate exchange rate volatility.

“Furthermore, the Bank considers it important to pass more detailed legislation on pension funds’ internal monitoring systems – including governance, key functions, risk management, and outsourcing – which should be harmonised with other financial market legislation.”

In the Bank’s assessment, the requirements made of pension funds’ key functions should be more stringent than they are currently, and special legislation on personal pension savings custodians should be passed. Furthermore, when the Pension Fund Act is reviewed, consideration should be given to the findings of impartial appraisers such as the International Monetary Fund,” states the Central Bank.