NEST, the £68bn pension scheme, has appointed Wellington Management to advance its emerging markets equity strategy to strengthen ESG risk evaluation and stewardship.
NEST said the appointment comes following an internal review, which led the fund to move its emerging markets equity allocation to an active, fundamental, discretionary approach, allowing for more selective investment in companies with strong growth prospects.
The move, it said, enables more selective investment in companies with robust ESG practices and strong growth potential.
NEST has committed £3.5bn to Wellington for this mandate. The new strategy will leverage Wellington’s deep, proprietary fundamental research across countries, sectors and companies in emerging markets.
To deepen the engagement with companies held within NEST’s emerging markets portfolio, the new strategy is expected to hold between 100 and 150 stocks, providing broad diversification across countries and sectors. This more focused approach, combined with analyst-led and regionally informed stewardship, will provide deeper, on-the-ground understanding of emerging market companies, according to the pension fund.
NEST believes that, backed by Wellington’s strong stock-selection capabilities, disciplined risk management and integrated ESG and climate research, the strategy is well positioned to identify attractive long-term opportunities and help deliver value for members.
The scheme’s current emerging markets equity strategy adopts a systemic approach and holds around 1,000 stocks.
Rachel Farrell, director of public and private markets at NEST Invest, said: “This strategic shift in our emerging markets equity strategy demonstrates how we continue to evolve our investment approach in ways that we believe will drive benefit for our members over the long term.”
Farrell added that with more than 80% of assets held in segregated accounts, including this emerging markets mandate with Wellington, NEST has developed one of the “most extensive segregated mandate programmes in the UK defined contribution (DC) market”.
She added that this gives the scheme greater control over how mandates are implemented and greater confidence in managing governance, sustainability, climate and market-specific risks.
