Friday 27 August 2021 5:53 pm

UK's Nest pension fund launches £1.5bn private equity spending spree

Workplace pension scheme giant Nest has launched a new procurement for private equity, in which it plans to invest £1.5bn – or 5 per cent of its assets under management – by 2024.

The state-backed pension fund, which has £20bn assets under management and 10m members, has announced a search for fund managers for the new private equity plans.

Stephen O’Neill, Nest’s Head of Private Markets, said the fund expects to invest around £80bn over the next twenty years.

“We want private equity to play an important role in our portfolio, offering strong returns and diversification.

“We’re excited about the positive impact we can have on growing companies.”

Nest said the focus of the new fund was on growth private equity, and that it was looking for bidders to “present global solutions that will be evergreen and scale with Nest over time.”

The move represents the first major expansion by a “defined contribution” pension fund into unlisted assets, and comes a few weeks after the prime minister and the chancellor called on the UK’s institutional investors to plough more capital into UK assets to ignite an “investment big bang” that drives an economic recovery from the pandemic.

The higher fees associated with these non-standard investments, such as private equity and infrastructure, have traditionally prevented pension fund managers from investing in these sectors, but the government has now loosened the annual charge cap.

In a letter calling on institutional investors earlier this month, the PM and chancellor argued that UK assets are being overlooked by domestic investors, leaving their international counterparts to gather the returns.

“Over 80 per cent of UK defined contribution pension funds’ investments are in mostly listed securities, which represent only 20 per cent of the UK’s assets,” they said in the letter.

“We want to see U.K. pension savers benefiting from the fruits of U.K. ingenuity and enterprise, being given the opportunity to back British success stories, and secure higher returns and better retirements,” the pair wrote.