NEST, the UK’s largest pension scheme by members with £49bn (€59bn) of assets, has committed to invest £5bn in private markets with Australian infrastructure manager IFM Investors and is taking a significant ownership stake.
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. Specific financial terms of the deal were not disclosed.
Fawcett said NEST is already investing 20% of its assets in public and private markets in the UK and IFM has an ambition to increase their exposure to UK investments. He said: “Together we will co-create strategies that have particularly a UK bias.”
Liz Fernando, NEST’s chief investment officer, said that the scheme will initially look to invest in a global infrastructure debt fund as part of the £5bn commitment.
This is because NEST already has exposure to infrastructure debt with its mandates, and it has been investing in private credit since 2019.
Fernando said: “We still have appetite across all assets within the private market space, but this is one where there was a very quick meeting of minds in terms of the product that IFM was already working on. It was a very natural fit and something we could get up and running quite quickly.”
Luba Nikulina, chief strategy officer at IFM, added that infrastructure is in a “really special place” because it provides both the characteristics of resilience but also growth.
She said: “There is a lot of demand in society to build new infrastructure, but then also renovate the existing one. When you think about the project, especially when you go into the upgrades or the build-out, obviously there is an equity component, but the debt is much more significant. And across the whole private debt spectrum, real assets is actually where you have much safer, lower risk exposure.”
Fernando said that the duo has other funds in mind but is still working out the details.
She said: “What’s really attractive about this partnership is the ability to co-create a product that meets the needs of NEST and meets the needs of NEST members, but will then also work for IFM’s other clients and shareholders.”
Fernando added that by acquiring a stake in IFM and not just collaborating shows that NEST is there for the “long term”, but also provides the pension schemes with more competitive fees.
She said the partnership does not take away or change any of the existing relationships NEST has with managers.
“We’ve got a huge amount of capital to deploy and there is plenty of space for everyone to be doing interesting things with us,” Fernando said.
David Neal, IFM Investors CEO, said the partnership is a “phenomenal investment opportunity globally and in the UK for decades to come”.
He said: “Imagine the capital required for the energy transition, the capital required for the digitalisation of our economies, the capital required just to maintain and grow existing traditional infrastructure, and then all of the ecosystem around that.
“It’s just an enormous amount of capital required, and that needs to be allocated by smart investors. We look at that and think there is a phenomenal growth opportunity.”
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Pamela is IPE's UK correspondent.
Before joining IPE in May 2023, she spent five years writing about the insurance industry.
During her career so far she won awards for Most Promising Newcomer in 2020 and Best Investigative Article in 2022 from the British Insurance Brokers Association, and was also highly commended at the WTW Media Awards for Insurance Features Journalist of The Year.View full Profile
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