UK – Mark Fawcett, CIO of the National Employment Savings Trust (NEST), has said he believes those working on the launch of the Pensions Infrastructure Platform (PIP) will "do their best" to make the fund as attractive as possible to defined contribution (DC) funds.
Speaking with IPE after NEST selected Legal & General Investment Management (LGIM) to oversee a standalone property mandate, Fawcett said the 20% allocation to real estate would ideally be invested in real assets, including infrastructure.
Asked whether there were currently infrastructure funds available that would be compatible with NEST's investment approach, he said this was "potentially" the case – going on to mention the PIP under development by the National Association of Pension Funds (NAPF) and the Pension Protection Fund.
"The NAPF is developing the PIP, and they are keen to have DC investors in it – not just NEST but other DC investors – so they will make it as DC-friendly as possible," Fawcett said.
He said he believed the attempted compatibility with DC funds would not necessarily extend to daily cash flows.
"We certainly think they will do their best to make it possible for DC investors to invest," he said.
Commenting on other asset managers, he said: "We have had conversations with a couple of other suppliers on funds they are developing – we are not quite certain whether they will be DC-friendly or not.
"But the market is moving away from traditional defined benefit and endowment-type products."
He speculated that, during the financial crisis, managers had been "retrenching rather than innovating", leading to an absence of products for DC funds despite the marked trend towards large-scale DC provision in the UK.
"The world is waking up to the fact DC pensions are the future of retirement saving," he said, adding that Australia was an example of a DC market that had devised ways to access infrastructure investment.
Fawcett also addressed the 70% exposure to domestic real estate that NEST would be seeking following the mandate award to LGIM, a domestic bias out of step with the remainder of its portfolio, where only 30% of assets were invested in the UK.
"Given the risk characteristics of property, having a UK bias made sense in this case, whereas for equities we don't think it does," he said.
IPE and Stirling Capital Partners are co-hosting a conference, Infrastructure for Pension Funds and Other Capital Owners, to take place on 2 October in London. For more information, please visit www.ipe.com/infrastructure.
