Nest, the £53bn defined contribution (DC) master trust, has announced new UK investments to coincide with its support of the government’s ‘Sterling 20’ initiative.
The master trust has allocated to UK private equity through an expanded partnership with Schroders Capital, and has begun deploying money through its arrangement with IFM Investors into UK infrastructure-related businesses.
Chancellor Rachel Reeves is to host the Regional Investment Summit this week (21 October), and ahead of the event has announced a group of 20 leading institutional investors, including pension funds and insurers, that are leading allocations to the UK. The move builds on the Mansion House Accord from earlier this year.
Today (20 October), Nest said it had begun deploying capital in a global infrastructure debt fund run by IFM Investors, which it seeded this year with around £500m. The first two investments are in UK companies. One is a broadband provider specialising in improving rural internet access in Scotland and the north of England, while the other is an “energy from waste” company with locations in the Midlands and north of England.
The master trust plans to invest approximately £5bn through IFM by 2030, after buying a stake in the asset manager earlier this year. IFM is co-owned by Australian pension funds.
Schroders Capital gets expanded private equity mandate
Separately, Nest has invested £500m with Schroders Capital, bringing the asset manager’s total mandate for the master trust to £1.5bn. Schroders was initially appointed to run private equity investments for Nest in 2022.
Schroders Capital has been tasked with investing in “established and young businesses at the forefront of innovation, in growth sectors such as artificial intelligence, healthcare, pharmaceuticals, and technology”, the asset manager said in a statement. Allocations will be made across the UK, North America, Asia, and Europe.
Rachel Farrell, director of public and private markets at the master trust’s in-house investment unit Nest Invest, said: “Private equity deals offer exciting investment opportunities for our members. It’s right that they’re no longer out of reach of the average UK worker, but a key component of their Nest pension.
“We want to keep growing our investment into this high-performing asset class. This supports our overall ambition – to expand our private market allocation to 30% of assets under management by 2030…
“What we’re seeing through both the Mansion House Compact and Accord is more appetite from institutional UK investors to access private equity. We’ve enjoyed being an early mover into the market, and our challenge to Schroders Capital is to keep up the hard work in what will become a more competitive market.”
‘Compelling opportunity’ in private equity
Tim Creed, head of private equity investments at Schroders Capital, added: “There is a compelling opportunity for UK savers to invest in private markets and shape their futures: maximising their pensions while spurring the evolution of companies driving critical innovation and growth.
“The UK’s pensions industry is no doubt waking up to the private equity sector’s potential to drive value for individual savers, businesses and the broader economy, and it’s promising to see this being reflected in increasing investor sentiment.”
Nest aims to increase its allocation to private market assets from around 18% of its investment portfolio to 30% over the next few years. It has so far invested around £2bn in private equity, of which approximately £381m is UK-based.
Liz Fernando, chief investment officer at Nest, said: “At Nest, we’re committed to delivering strong, consistent returns for our members while supporting UK economic growth – investing in UK private markets is a key part of achieving that…
“With around £4bn already committed to UK private markets and an ambition to reach £12bn by 2030, Nest is investing in the future of the UK. As an early supporter of the Mansion House Accord, we’re here to help create lasting opportunities that benefit our members and the communities they live in.”
