IPE UK Briefing: NEST strengthens private markets commitment

NEST, the UK’s largest pension scheme by members with £49bn (€59bn) of assets, has committed to investing £5bn in private markets with Australian infrastructure manager IFM investor earlier last month.

NEST has previously committed to increasing its private markets assets allocation to 30% by 2030. Currently, its private markets allocation is 17% and the IFM tie-up will, according to chief executive officer Mark Fawcett, be “instrumental” in reaching the 30% target.

As part of the partnership, NEST will become a 10% shareholder in IFM’s holding company, Industry Super Holdings. This will make it IFM’s first overseas owner, joining the existing 16 Australian superannuation funds that collectively own IFM.

This is one of the biggest private market commitments by a British pension scheme to date and especially timely with the UK government encouraging pension schemes to invest in private markets in a drive to boost the national economy.

However, in a report published the same week, The People’s Pension has found that investing 10% of all projected assets in private markets via external managers by 2030 could cost schemes, and savers, as much as £1.5bn (€1.8bn) per year in fees.

It suggested that bringing fund selection and management in house and using successful co-investment programmes could reduce total costs by more than 60%, or nearly £1bn.

However, it acknowledged that individual trusts lack the economies of scale to deliver the largely internalised approach to investing. It instead suggested that it would “make sense” for funds to partner in building capacity in the form of a sector-aligned private markets unit if this were feasible.

Small schemes

Elsewhere, UK pensions consultants suggested that while large deals over £1bn (€1.2bn) have become ‘business as usual’, there is significant momentum and opportunity for smaller pension schemes in the bulk purchase annuity (BPA) market in 2025.

The previous year saw new entrants Royal London and Utmost complete their first deals below £100m and most of the established BPA insurers expand their offerings at the smaller end of the market to give better service via streamlined processes. 

In December, the Pension Insurance Corporation (PIC) announced its first transaction under ‘Mosaic’, its new streamlined solution for small schemes. This was a £20m deal with the General Council of the Bar Pension and Life Insurance Fund. 

Just Group completed 129 sub-£100m transactions in 2024 – a record for any single insurer in a calendar year, according to XPS. Aon has led advice on transactions under £100m in size with six different insurers in 2024, showing “clear evidence” of the level of competition going into this year.

Earlier this week, Brookfield confirmed it will start operations in the UK later this quarter under the Blumont Annuity UK brand, which consultants expect will further drive the innovation and competition in the market bringing more favourable pricing.

Items to note:

• The final instalment of the IPE Real Assets Seminar Series 2025 is on Thursday 27 March at the Walbrook Club in London.

Pamela Kokoszka

UK Correspondent