Government-backed master trust Nest is significantly expanding its private market allocation by acquiring a stake in private market manager IFM, which is owned by a consortium of Australian pension funds, in a bid to tackle deployment challenges for the rapidly growing fund.
Nest, which manages approximately £48bn in assets on behalf of nearly 14 million members in the UK, is attempting to navigate the deployment challenge in private markets by becoming the first overseas shareholder in IFM’s history.
The UK master trust, which launched in 2011 with an initial contribution of £19, has since seen its assets surge. It now reports more than £500m in contributions coming in every month. By the end of the decade, its assets are expected to rise to more than £160bn.
Nest has been one of the first DC investors to venture into unlisted assets, having announced a private credit mandate in 2019. It now intends to expand its strategic asset allocation to private markets from 17% to 30%—an ambition that presents real deployment challenges, as Mark Fawcett, CIO of Nest Invest, explains.
“We now have £8bn invested in private markets. By 2030, that will be £30bn, so we have a real deployment challenge. We have some great managers now, but by leveraging IFM’s expertise, we are going to accelerate our investments in private markets,” he said.
Taking a direct stake in Industry Super Holdings will help Nest access private market strategies more cost-effectively than through a regular investment with a manager, Fawcett revealed.
It also offers the master trust the opportunity to customise the investment strategies it wishes to pursue, said Liz Fernando (pictured), CIO of Nest. “The really attractive thing about the partnership is that we are able to create products that meet the needs of Nest members but will also work for IFM and its shareholders.”
The master trust will initially deploy capital into a global infrastructure debt fund, with a view to expanding further into private equity, she added.
The announcement is likely to be welcomed by the UK government, which is keen to see more DC investment in UK infrastructure assets. IFM pledged in 2023 to invest £10bn in UK infrastructure and currently holds stakes in Manchester Airport, Anglian Water, and the M6 toll road.