Private equity investment now available for millions of UK workers

• Nest announces new partnership with Schroders Capital
• Private equity deals to focus on growth and mid-market investments
• Nest’s CIO: “This could be a watershed moment for the PE industry”

Nest, the pension scheme representing a third of the UK workforce and £24bn worth of assets, has today confirmed its appointment of Schroders Capital to help its savers invest in private equity.

Private equity is where an investor has an ownership stake in a company that is not publicly listed or traded. By getting in early in the lifecycle of a company, when the potential for significant expansion is considerable, strategic investments can provide impressive returns.

Schroders Capital, the private markets specialist which is part of the Schroders Group, has already begun sourcing investment opportunities for Nest. The fund manager will focus on growth and middle market deals, whereby the goal is to expand the business and its profitability.

The private equity investments will be folded within Nest’s existing default ‘Retirement Date’ funds and Nest’s members will benefit from them within the existing charge structure.

Nest estimates it will have at least £1.5bn invested in private equity by early 2025, depending in part on the right deals being available. The longer-term target is to have around 5% of Nest’s portfolio invested in private equity.

Commenting on the appointment Mark Fawcett, Nest’s Chief Investment Officer, believes this could be a “watershed moment” for the private equity industry in helping make it accessible for average savers.

“Many UK workers, for the first time in their lives, will now have the chance to benefit from investing in private equity.

“We’ve never accepted that any type of investment is out-of-reach for our members. We want every tool in our toolbox to boost the risk-adjusted returns for our members.

“At Nest we’ve developed a sophisticated investment strategy to help navigate changing market conditions, for when markets are buoyant and, more importantly, for when they’re not. Our move into private equity is just the latest evolution and has the potential to drive strong returns for our members, putting them in a better position for retirement.

“I want to thank Schroders Capital for their innovation and commitment to open up private equity for the average saver. They have huge amounts of experience and expertise co-investing on these types of deals and their global scope opens up exciting opportunities.”

Tim Creed, Head of Private Equity Investments, Schroders Capital, commented:

“In the past, private assets – like private equity – have been accessible only to large defined benefit pension schemes. But today’s announcement is further evidence that this is changing. A huge pool of UK pension savers will now be able to access this asset class through Nest’s scheme and benefit from Schroders Capital’s long-standing investment expertise and history of strong performance.

“We are excited to be at the forefront of this evolution as the democratisation of this asset class gathers pace. Our focus is committed to identifying and delivering investment performance in the growth and middle market space and helping secure the retirement futures of UK savers.” 

Nest’s Head of Private Markets, Stephen O’Neill, commented:

“Private equity investors provide a vital source of capital for companies looking to grow their business, meanwhile these deals are likely to generate superior returns to most other asset classes, which is ever more important in times of high inflation.

“Schroders Capital has created a bespoke fund for Nest, making us one of the first UK defined contribution schemes to invest directly into private equity. It will be evergreen and scalable, ensuring it will remain a significant part of our investment strategy.

“Amongst the reasons we appointed Schroders Capital was their commitment to responsible investing. They aim to be at the forefront on ESG and are investing heavily in raising standards in the private equity market where key factors, such as data gathering and disclosure, are lagging behind public markets.”

The deals Schroders Capital source will be in North America, Asia and Europe, including the UK, focused on industries such as financials, consumer, technology and healthcare. Nest is aligned with Schroders Capital on prioritising growth companies, as well as small-cap and mid-cap deals.

Schroders Capital will originate deals as co-investments alongside other third-party funds. Nest will not be invested in any third-party funds through its relationship with Schroders Capital.

Ends.

Notes to editors

Nest launched the private equity procurement in August 2021. In total 14 fund managers applied.

Nest’s charging structure is made up of two parts: a contribution charge of 1.8% on each new contribution, and an annual management charge (AMC) of 0.3% on the total value of a member’s pot.

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Any media queries for Nest can be directed to Ben Ward: Ben.Ward@nestcorporation.org.uk, 07881 511845

Any media queries for Schroders Capital can be directed to Andy Pearce: Andy.Pearce@Schroders.com, 0207 658 2203/07970 828315

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About Nest

Nest was set up by the government to ensure every UK employer could offer a workplace pension to their employees. Since then, it’s grown to become the largest workplace pension scheme in the country with more than 10 million members. One in three of the UK working population currently have a retirement fund with Nest.

As a not-for-profit pension scheme, Nest doesn't answer to shareholders. It’s set up to serve its customers’ interests and aims to help millions of people enjoy a better retirement. Nest’s members benefit from an award-winning investment strategy and one of the most diversified DC portfolios in the UK. By the end of the next decade Nest is expected to have around £100bn assets under management.

About Schroders Capital

Schroders Capital provides investors with access to a broad range of private asset investment opportunities, portfolio building blocks and customised private asset strategies. Its team focuses on delivering best-in-class, risk-adjusted returns and executing investments through a combination of direct investment capabilities and broader solutions in all private market asset classes, through comingled funds and customised private asset mandates.

The team aims to achieve sustainable returns through a rigorous approach and in alignment with a culture characterised by performance, collaboration and integrity.

With $74.9 billion* assets under management, Schroders Capital offers a diversified range of investment strategies, including real estate, private equity, secondaries, venture capital, infrastructure, securitised products and asset-based finance, private debt, insurance-linked securities and BlueOrchard (Impact Specialists).

*Assets under management as at 31 December 2021 (including non-fee earning dry powder and in-house cross holdings)