Nest buys stake in infrastructure manager IFM Investors

The master trust intends to increase its investments in unlisted infrastructure, private equity and other similar asset classes from 17% – currently around £8bn – to 30% of the portfolio over the next few years. 

The minority ownership stake in IFM Investors will play a significant role in realising this ambition, according to Nest Invest chief executive officer Mark Fawcett. 

He said: “If we hit our target, that would be £30bn, which presents a real deployment challenge. We’ve got some great managers now, but by leveraging IFM’s expertise in private markets, we are going to accelerate our investments.” 

IFM Investors is jointly owned by 16 Australian superannuation funds. Nest will be the first non-Australian entity to become a shareholder. 

Fawcett said this ownership meant there was an “alignment of interests” with member interests being paramount. He added that it was “a great opportunity to invest alongside like-minded investors and take advantage of a global leader in private market investment”. 

The holding – the value of which has not been disclosed – will sit within Nest’s private equity portfolio. The purchase is subject to regulatory approvals being granted. 

New strategies planned 

The two organisations are already exploring the launch of a global infrastructure investment strategy and have indicated their intention to allocate significantly to the UK. 

Fawcett said new products would include strategies with a bias towards the UK, as Nest seeks to maintain its already high level of domestic investment, estimated at £10.6bn. 

“We have a real commitment to UK investing – 20% of our assets are in the UK across public and private markets,” the CEO said. “IFM has an ambition to increase its exposure to UK investment too, so together we will co-create strategies that have a UK bias.” 

David Neal, CEO at IFM Investors, said there was “a phenomenal investment opportunity” in the UK and globally that would play out over “decades”. 

“Imagine the capital required for the energy transition, for the digitalization of our economies, and to maintain and grow existing traditional infrastructure,” Neal said.  

“Then the ecosystem around that, all the companies required to support that sort of world of infrastructure. It’s an enormous amount of capital required, and that needs to be allocated by smart investors.” 

As well as investing in IFM’s core areas of expertise – infrastructure equity and debt, and private equity – the organisations are exploring opportunities in infrastructure-related technology as a potential separate strategy. 

A novel route to expanding private markets investments 

It is the first time Nest has taken a direct stake in an asset manager, but chief investment officer Liz Fernando said it did not signal a change in the relationships with any of Nest’s other providers. 

“A partnership like this shows you’re in this for the long term,” she said. “This doesn’t in any way change our relationship with our existing managers. We’ve got a huge amount of capital to deploy, and there is going to be plenty of space for everyone to be doing interesting things with us.  

“The equity stake does mean that we can talk more openly about things. It gets us into a group of people who have the ability to join IFM and co-develop products, which I think is a really nice way of making sure that the opportunities we’re getting really do meet our needs.” 

Nest is the largest master trust in the UK with £48bn in assets under management. It expects this figure to more than double in the next five years, with assets projected to surpass £100bn by 2031 according to its own forecasts.