NEST is providing Schroders Capital with a further £500m (€575.5m) for its private equity mandate, as part of a five-year plan to deploy £5bn into private markets.
The fresh allocation strengthens the UK defined contribution master trust’s partnership with Schroders and brings the scheme’s total committed capital to Schroders Capital’s private equity strategy to £1.5bn.
This latest commitment to Schroders contributes to NEST’s strategy of increasing its private markets allocation from around 18% to 30% over the next five years.
NEST, which manages more than £55bn on behalf of 13.5 million members and 1.2 million employers, said Schroders Capital’s mandate is to invest in both established and young businesses “at the forefront of innovation”, in growth sectors such as artificial intelligence, healthcare, pharmaceuticals and technology across North America, Asia and Europe, including the UK.
The master trust added that scaling up private market investments can “not only drive stronger long-term return potential for members but also support growth in the UK economy”. Across its portfolio, NEST has around £2bn directly invested in unlisted equity, of which nearly all is invested through its default funds, and around 18% (£381 million) is to UK companies.
Rachel Farrell, director of public and private markets at 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 (illiquid) allocation to 30% AUM by 2030.”
Farrell added: “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.”
Schroders’ latest Global Investor Insights Survey found that institutional investors like NEST are “increasingly turning to private markets to access attractive return and income opportunities”.
Tim Creed, head of private equity investments at Schroders Capital, said: “There is a compelling opportunity for UK savers to invest in private markets and shape their futures: maximising their pensions whilst 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.
“This further commitment from NEST not only strengthens our partnership but also serves as a testament to the success of our strategy. We look forward to building on this momentum as we continue to unlock untapped opportunities for millions of savers across the UK.”
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