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NEST returns 7.6% in first half-year in service

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  • NEST returns 7.6% in first half-year in service

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UK - The National Employment Savings Trust (NEST) has announced returns of as much as 7.6% in its first half year in service, with the new pension scheme reporting assets under management of nearly £500,000 (€600,000).

The auto-enrolment fund, conducting a soft launch in the months to 31 March, said in its annual report it attracted 100 employers and 850 members over the period, with the largest amount of contributions invested in its target-date funds.

Breaking down fund returns over its default target date fund and five alternatives, NEST saw its sharia-compliant option post the strongest performance.

Despite falling short of it benchmark - the Dow Joes Islamic Market World index - by 1.6 percentage points, the option still returned 7.66%, closely followed by the scheme's ethical investment option with returns of 7.61%.

Three examples of NEST's target-date funds, for workers retiring in 2021, 2040 and 2051, returned broadly double of its benchmark of 2.35%.

However, because during the growth phase the target-date fund aims to outperform the consumer prices index by 3 percentage points, the 4.59% return was not enough to achieve its goal.

Commenting on returns, chief investment officer Mark Fawcett said: "NEST's Retirement Date Funds have generally been cautiously positioned.

"Relatively high allocations to short-term money markets and the gilt market served well to protect members' money from the sharp falls in equity markets over the summer of 2011."

Breaking down its investments regionally, NEST said that just under half were UK assets.

Only 7.7% of equity holdings were listed in the UK, compared with 39.7% in the US.

Apple was the scheme's largest single stock holding, accounting for 0.8% of assets and trailing only holdings in various UK gilts.

Nonetheless, the UK remained its largest single region by investment at 48.1%, followed by North America, accounting for just over a quarter of assets.

Of its seven asset managers, four outperformed their benchmarks, with the strongest performance coming from State Street Global Advisors' UK Index Linked Gilts over 5 Years Index fund, returning 11.5% - 0.25% short of its benchmark.

The largest underperformance was posted by BlackRock's Aquila Life Market Advantage fund, returning 3.2% - 1.7% shy of its benchmark.

UBS Life World Equity Tracker fund, the scheme's single largest underlying investment fund, returned 4.59%, slightly outperforming the FTSE All World Developed index.

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