One of the most significant strategic pivots under Mark Versey’s leadership almost four years at the helm of Aviva Investors has been a robust push into private markets.
While the shift is not unique to Aviva Investors – competitors such as Schroders, Legal & General and M&G, have also expanded their private market portfolios – Aviva’s approach is distinct, says Versey, in its co-investment structure, whereby external clients can participate alongside Aviva in long-term projects.
“We’re now able to cater to institutional investors across a variety of private market assets,” Versey explains.
“It’s all about alignment,” he said. “The Aviva name brings long-term stability, enabling us to attract other institutional investors who want to share in a sustainable and patient capital approach.
“We’re not in it for a quick profit but for long-term cash flows—this benefits the UK economy and aligns with the government’s focus on sustainable investment.”
The macroeconomic appeal of private markets is evident. As traditional equities experience heightened volatility, private market investments offer a return profile that mitigates some of this uncertainty.
“It’s really an answer to two challenges,” Versey said. “It diversifies risk away from public markets and provides exposure to future-shaping sectors like the hydrogen economy and carbon capture.”
The Future of Real Assets and Sustainability
Versey took over as CEO of the investment arm of the UK-listed insurer from Euan Munro in January 2021.
He joined Aviva Investors in 2014, becoming CIO for the firm’s £47bn private markets division – which includes infrastructure, real estate and private debt – from its formation in 2018.
Since becoming CEO, Versey has overseen an expansion into sectors with long-term growth potential, especially those focused on decarbonisation and sustainable infrastructure.
Aviva’s venture into forestry, a recent development under Versey, exemplifies this commitment.
Forestry is an asset class with positive environmental impacts that aligns with Aviva’s net-zero targets.
For Versey, the pursuit of sustainability extends beyond Aviva’s immediate holdings. It informs Aviva’s lending practices as well. “Our green transition loan framework incentivizes borrowers to reduce their carbon footprints,” he said, explaining that borrowers who commit to making their buildings more energy-efficient receive more favourable terms.
“Not only does it reduce the environmental impact, but it makes the asset more valuable,” he says.
This approach has found strong alignment with institutional clients: according to Aviva’s recent real assets survey, 57% of respondents have net-zero targets but struggle to define the path to achieving them.
“We believe you can invest sustainably and still achieve strong returns,” Versey says. “For instance, if you support high-potential assets like the hydrogen economy or nature-based solutions, you’re future-proofing the investment against climate risks.”
Multi-Asset Solutions for a Growing Wealth Channel
Aviva’s capabilities are also expanding into wealth management, where demand for multi-asset solutions is burgeoning.
Recently, Aviva acquired Succession Wealth, adding to its expertise in the advised wealth sector. This is part of a larger strategy to meet the unique demands of affluent investors and the high-net-worth segment, where high-alpha offerings are increasingly popular.
“In the wealth market, multi-asset strategies are the standard, but affluent clients are also looking for high-alpha, high-income products,” Versey says, highlighting the shift from passive to more dynamic investments.
Aviva’s multi-asset offerings are expected to fill this niche, particularly as it positions itself as a leading multi-asset house globally. The success of these products depends on Aviva’s ability to tailor them to different distribution channels, from institutional clients to private wealth management.
Challenges in Democratising Private Markets
For asset managers like Aviva, bringing private markets into the wealth channel has been challenging. Private market assets are generally less liquid than traditional assets, which limits their accessibility. But Versey is exploring ways to overcome this barrier through innovative fund structures.
“We want to democratise access to private markets,” he said, “but without requiring large cash reserves in funds, which would compromise yields.”
Aviva Investors was one of the first in the UK to launch a Long-Term Asset Fund (Ltaf), the UK’s post-Brexit answer to the European Long-Term Investment Fund (Eltif), after the UK financial regulator approved the structures in 2021. Operating as open-ended funds, they are designed to invest in long-term, less-liquid assets and are seen as opening up private markets to a wider set of investors.
Ltafs allow monthly trading and are well-suited for retirement schemes in need of reliable, long-term cash flows. “It’s designed with gating provisions that enable orderly asset liquidation,” he explains. These provisions serve as a safeguard, allowing Aviva to manage liquidity in a way that protects both the fund and its investors in case of market disruptions.
Global Expansion and the Mansion House Compact
In addition to expanding in the UK, Aviva has prioritised global distribution, especially in Asia, where it has established a foothold in Singapore to attract institutional investors from across the region. The company does not currently have investments in China, nor does it have immediate plans to enter that market.
Aviva has also committed to the Mansion House Compact, a UK government initiative that encourages pension schemes to invest in private markets.
“Growing our private market business is part of Aviva’s public commitment to the Compact,” Versey says, underscoring the alignment with national goals.
Perhaps the most defining aspect of Aviva’s strategy under Versey has been its nuanced approach to sustainable investment.
He acknowledges the pitfalls of some early “green” funds in Europe, which were simply excluding certain sectors, resulting in suboptimal performance.
Aviva’s approach has been to support companies transitioning toward sustainability, rather than blanket exclusions. “We need to invest in the transition itself,” Versey says.
“Avoiding a sector entirely can mean missing out on long-term gains. Our goal is to identify companies within sectors that are leading the transition and support them.”
He cites a recent investment in sustainable aviation fuel production as an example. By investing in the supply chain for sustainable fuels, Aviva not only supports decarbonization but also addresses demand from airlines committed to net-zero goals.
“We’re future-proofing our investments by aligning them with sustainability,” he said. Aviva’s science-based target initiative aims to reduce carbon intensity by 60% by 2030, but Versey emphasises that this approach is highly tailored.
“Not all sectors can decarbonize at the same rate,” he notes, adding that the firm’s asset owners have the ultimate say in how their investments align with net-zero commitments.
Outlook for Fixed Income and Asset Growth
As global interest rates dip, Versey believes that fixed income remains a growth area. As interest rates decline, investor demand typically shifts from money market funds to higher-yielding assets like investment-grade credit and emerging market debt.
“We see a journey within fixed income,” he said. “Institutions are looking to keep yields high, and that demand will only grow as we move toward lower interest rates.”
Aviva Investors’ real estate division – where Versey worked for several years before becoming chief executive – manages several UK-focused investments, particularly in housing and infrastructure. Recent large projects include student housing in Staffordshire and Glasgow.
On the industry debate about whether the UK should reverse EU-era MiFID II rules on unbundling investment research costs and passing them onto clients, Versey says that the “horse has bolted”, despite the FCA saying in a recent policy statement that asset managers should be allowed to rebundle and pass on research costs.
Outside his role at Aviva, the 52-year old Cambridge University mathematics graduate enjoys skiing and golf, though he spends most weekends with family, often taking on the role of “amateur sports enthusiast and taxi driver” for his sons, aged 12 and 14.
Versey’s ambitions for the next three years include growing Aviva’s wealth and retirement offerings and expanding its fixed-income solutions for institutional investors.
This comes amid ongoing outflows in the asset management sector, which Versey attributes to rising inflation and market volatility.
In the first nine months of this year, Aviva Investors suffered £1.7bn in outflows though AuM registered an uptick of 2%. But Versey sees private markets as a stabilising force for Aviva, providing long-term investments that can weather such challenges.
