UK – The UK's National Employment Savings Trust (NEST) is to allocate one-fifth of its assets to a real estate fund overseen by Legal & General Investment Management (LGIM) designed specifically for defined contribution (DC) pension schemes by providing exposure to direct UK property and global listed real estate stocks.
The scheme, launched as part of the auto-enrolment reforms underway in the country, announced earlier this year that it would seek to include direct real estate in its investment universe for the first time.
NEST will invest in the Hybrid Property Fund, a vehicle launched in 2011 to offer DC pension schemes the ability to invest directly in UK commercial property and global real estate stocks, with 70% weighting towards the former.
This will give the pension scheme exposure to LGP's UK balanced fund and LGIM's global REIT equity index tracker fund.
NEST said the real estate mandate would be added to its high risk and ethical funds, as well as the default retirement date funds – although the retirement date funds currently have a minor, 3% exposure to listed real estate through BlackRock's diversified beta mandate.
During the growth phase of the retirement date funds, real estate would amount to 20% of assets, with regular reviews of the asset allocation by the investment team overseen by NEST CIO Mark Fawcett.
In a statement, the scheme added of the 20% exposure: "For a DC scheme, this is a relatively major allocation to real estate, which NEST expects will prove capable of delivering long-term sustainable growth for its members."
NEST currently manages the retirement date funds on a glide path, with the growth phase the longest-single period for members prior to approaching retirement and entering the consolidation phase, when it lowers risk.
Fawcett said he was continually searching for "cost-efficient opportunities to access rewarded risk", and that the new mandates would allow NEST to continue broadening its approach to investment.
Bill Hughes, managing director at Legal & General Property, said the fund allowed for "enhanced diversification and liquidity".
"NEST is an industry-leading platform and likely to be one of the most significant participants in the UK pensions industry over the next decade," he said.
"Therefore, we see this strategic decision to include direct property within its key building blocks as a major step forward for commercial real estate within the new world of DC pensions and a significant endorsement of our funds."