United Kingdom: Britain’s largest workplace pension scheme, Nest, has moved its entire £3.5 billion ($4.6 billion) emerging-markets equity portfolio to US investment manager Wellington Management, ending more than a decade of passive index investing.
Why Did Nest Change Its Investment Strategy?
Nest said the move is intended to give it greater influence over sustainability risks and corporate governance. Its previous strategy spread investments across more than 1,000 companies, which the scheme said limited its ability to engage directly with individual businesses.
What Will Wellington Manage?
Wellington will manage a more concentrated portfolio of around 100 to 150 emerging-market stocks. The strategy will be benchmarked against the MSCI Emerging Markets Index, with Wellington targeting an additional 100 basis points of outperformance.
Why Is Nest Focusing on Emerging Markets?
Nest said emerging markets can offer opportunities for active managers because some of these markets are considered less efficient. The scheme’s emerging-market holdings account for around 5.2% of its total assets, with most of its investments held through a systematic developed-markets strategy.
How Large Is Nest?
Nest manages around £68 billion for more than 14 million automatically enrolled workers in the UK. The scheme had used passive emerging-market investments since 2014 and later adopted a climate-aware strategy in 2021.
The decision follows a broader shift among some pension schemes toward active management of emerging-market equities, including the People’s Pension, which moved part of its allocation to an actively managed quantitative strategy last year.