UK – The National Employment Savings Trust (NEST) is set to invest in real estate globally, as it tendered its first standalone real estate mandates.
The defined contribution (DC) scheme said in its tender notice that it would look to invest in a UK direct property fund and a global real estate investment trust (REIT), as well as equivalent funds with strong sustainability credentials that would allow the real estate exposure to be incorporated into the NEST's Ethical Fund option.
"NEST will also consider solutions that effectively deliver any combination of our requirements, providing we are satisfied with the risk management and asset allocation approach, and intend to award up to four contracts as appropriate," it added.
Explaining the decision to invest directly in real estate funds, the scheme said property had been deemed an "an important asset class" that trustees wanted to include.
Chief investment officer Mark Fawcett added: "This latest procurement allows NEST to provide even more sophistication in our approach to investing for a new generation of savers."
NEST currently offers six white-label investment options, including a target date fund built around eight underlying funds – offered by managers including UBS Global Asset Management and Royal London Asset Management.
Launched as part of the UK government's introduction of automatic enrolment, NEST has so far not invested directly in real estate.
Instead, it has gained its real asset exposure through a diversified beta mandate overseen by BlackRock.
As of September last year, 31% of its assets were invested with the BlackRock Aquila Life Market Advantage fund.
Through the 31% allocation to the BlackRock fund, NEST already has a small exposure to listed property.
The trust-based fund's decision does not come as too great a surprise and follows NEST's 'Best Newcomer' prize at last May's IP Real Estate Awards.
At the time, it said it would examine the possibility of property investments outside its diversified beta portfolio in the near future, and cited the advantages of gaining exposure to real estate's illiquidity premium as one of its attractions.
The fund added that the eventual inclusion of real estate would have a "more beneficial" impact on its overall portfolio than the inclusion of any other asset class.
Further information about the process can be found on NEST's tender e-portal and submissions should be made by 25 Janaury.