NEST (National Employment Savings Trust) is planning to enhance its ability to diversify members’ portfolios by procuring an emerging market bond fund mandate. This will be added to the existing ‘building block’ funds that underpin the scheme’s default NEST Retirement Date Funds and some of its alternative fund choices.

The scheme is searching for an actively managed pooled emerging market debt fund that blends bonds denominated in both local and hard currencies  (predominantly US Dollars).

Mark Fawcett, NEST chief investment officer, said:

‘Emerging market debt is becoming a strategic holding for a growing number of pension schemes. This is in part because emerging market bonds can offer attractive yields in an otherwise low yielding fixed income environment. We think it’s appropriate to have emerging market debt among the growing number of asset classes NEST can call on to deliver better retirement outcomes for our members.

‘NEST is committed to searching out new opportunities for diversification where we see potential benefits for our members. Emerging market debt has evolved over the past two decades. What was once a small market of US Dollar-denominated sovereign debt is now a diverse mix of local and hard currency sovereign and corporate debt totalling more than USD 2 trillion. We want members to be able to reap the benefits of exposure to this market.

‘We believe an active management approach can take advantage of opportunities while managing the portfolio risk by avoiding unattractive or risky borrowers. By having an investment universe of both hard and local currency debt, the manager will have the ability to invest in the most attractive areas of the market.’

The deadline for receiving tenders will be in October 2015 with a view to awarding the contract in early 2016.

For more information please contact Andy on Andrew.legon@nestcorporation.org.uk 

NEST’s investment approach - key features

1. unique default option comprising of 47 single-year target date funds, risk managed for each year of retirement
2. focused fund range including Ethical, Sharia, Lower Growth and Higher Risk options with the same low charge as the default
3. sophisticated risk management driven by best practice investment techniques, high quality analysis and transparent governance  
4. cost-efficient delivery of innovative solutions powered by leading global fund managers
5. clear investment communications designed with and for members, employers and their advisers.

NEST in numbers (as at 23 August):

• NEST has over 2.3 million members.
• Our opt-out rate is 8 per cent on average and lower for younger members.
• There are over 25,500 employers using NEST, plus over 1,000 self-employed members.
• There are over 3,000 NEST connectors helping employers use NEST.
• We’re looking after around £535 million on behalf of our members