NEST, the UK defined contribution (DC) master trust, is seeking a commodities manager to bring the asset class into its portfolio for the first time.
The commodities mandate would sit within the pension scheme’s Retirement Date fund range and would also be available to scheme members as an “alternative” fund choice.
In a statement, NEST said the manager would need to demonstrate an ability to “navigate the risks and opportunities” of the asset class, including taking into account environmental, social and governance risks.
Its preference is for a blended strategy including commodity-related equities. NEST would consider seeding a new launch if appropriate, it said.
NEST initially set out plans for investing in commodities in its annual responsible investment report, published in September last year. It also said it was considering allocations to infrastructure, global credit and private debt.
John St Hill, deputy CIO at NEST, said the commodities allocation was expected to have a “moderate” correlation to equity and bond markets. “We also think that it will provide some inflation protection,” he added.
St Hill said the fund’s growing portfolio had opened up opportunities to diversify its assets.
“Commodities look attractive relative to their long term historic prices,” he said. “As the world’s population grows and incomes in the developing world rise, we expect increasing demand for commodities. We want our members to benefit from these long-term trends.
“We’re looking to build a constructive, long-term relationship with a fund manager that can demonstrate its ability to support that goal.”
NEST has its own tender website for applications, available here. The deadline for responses is midday UK time on 26 February.
NEST – the National Employment Savings Trust – was set up by the UK government in 2008 to help facilitate its pension auto-enrolment policy. At the end of March 2017 the scheme had 4.5m members and £1.7bn (€1.9bn) in assets under management.
The Bloomberg Commodity index lost 29.9% in euro terms over the five years to 30 January 2018, according to FE Analytics. In the same period, MSCI’s ACWI Commodity Producers index gained 12.3%.