Nest Corporation has selected the fund managers for its first five mandates. These funds will together provide the building blocks for the Nest yearly target date funds (its default fund offering).
The five mandates are:
Mandate 1 - Passive Global Equities:
• UBS Life World Equity Tracker. This fund, managed by UBS Global Asset Management Life, tracks the FTSE All-World Developed Index.
Mandate 2 – Passive UK Gilts:
• State Street UK Conventional Gilts All Stocks Index Fund. This fund tracks the performance of the FTSE Actuaries UK Gilts All Stocks Index.
Mandate 3 – Passive UK index-Linked Gilts:
• State Street UK Index Linked Gilts over 5 Years Index Fund. This fund tracks the performance of the FTSE Actuaries UK Index-Linked Gilts over 5 year Index.
Mandate 4 – Sterling Cash:
• BlackRock Aquila Cash Fund. This low risk fund aims to maximise current income, consistent with preservation of principal and liquidity, by the maintenance of a portfolio of high quality short-term Sterling “money market” instruments.
Mandate 5 – Diversified Beta:
• BlackRock – Aquila Life Market Advantage Fund. This fund, managed by BlackRock Asset Management Pensions, invests in a wide range of asset classes, primarily through Blackrock’s range of pooled index funds.
This fund’s objective is to deliver returns similar to a 60% equity:40% bond portfolio over the long run, with 40% lower risk. A key feature of the fund’s asset allocation process is the focus on risk management, which designs a portfolio that has a balanced exposure to the range of fundamental risks and incorporates strategies to manage portfolio risk at market extremes.
Nest’s investment and procurement teams were assisted by Aon Hewitt in selecting a short list of suitable pooled fund managers.
While the initial mandates were largely passive, active management may feature in the Nest investment strategy as the scheme grows.
Nest has also issued invitations to tender for a socially responsible investment fund and a Sharia-compliant fund. Those contracts are expected to be awarded in March or April 2011.
Commenting on the appointments, Tim Jones, Nest chief executive, said: “Nest is on track. We are getting the infrastructure in place now so that we can test the systems and be ready to accept our first contributions later this year. I am really pleased with the quality of the managers who want to work with us. We are gathering together an impressive collection of global leaders to work with us to deliver Nest.”
Mark Fawcett, Nest chief investment officer, added: “The infrastructure we are putting in place will give our members access to a diverse set of global asset classes, through Nest-constructed yearly target date funds, which will help us to manage investment risks in a way that’s appropriate for them.”
Juliet Bullick, head of BlackRock’s UK institutional business, said: “The pensions regulation that becomes effective in 2012 will mean more people in the UK have the opportunity to become members of a pension scheme than ever before. BlackRock is delighted to have been chosen by Nest to help millions of people build a better financial future."
Kanesh Lakhani, head of State Street Global Advisors UK, added: “We are delighted to have been awarded two fixed income mandates by NEST. State Street Global Advisors has a long history working with many of the world’s largest pension funds managing a range of investment strategies to deliver on our clients' investment objectives.”
John Nestor, head of UK at UBS Global Asset Management said: "As long-standing players in the UK pensions industry, we are highly supportive of Nest's mission to provide access to funded pensions for all. We are excited to have the opportunity to provide the core equity holding and a potential long-term growth engine for investors.”
Stephanie Hawthorne, editor, Pensions World, comments: "It is a shame that Nest, a large government backed UK retirement savings scheme, so far, has no British fund managers or UK administrators."
Author: Pensions WorldPensions World is the leading monthly magazine for pensions professionals published by LexisNexis.