Nest awards commodities mandate as part of step-change in investment strategy

NEST has today announced that CoreCommodity Management has won the mandate to invest in commodities on behalf of its 6.9 million members. 

The new fund will make up one of the asset class building blocks in the pension scheme’s default strategy, where over 99 per cent of NEST members invest. It is a segregated fund, delivered solely for NEST, and has been designed specifically to cater for NEST’s environmental, social and governance (ESG) requirements. 

This is the first time NEST has established a segregated mandate, having invested solely in pooled funds to date. The mandate gives NEST greater control over the objectives and design of the fund and signals a step-change in the evolution of NEST’s investment strategy. 

NEST’s initial allocation to commodities will be up to 5 per cent of the portfolio but the NEST investment team will adjust the allocation over time according to market conditions.

Commenting on the announcement, NEST Chief Investment Officer Mark Fawcett said, 

‘We are already receiving over £200m in contributions from members every month and that is set to double next year and rise rapidly from there. As we are fast approaching being one of the biggest pension schemes by assets in the world, we’re able to harness that growth to cost-effectively access new sources of return without increasing members’ investment risk. 

‘While markets have been benign since auto enrolment kicked off six years ago, we’ve had a turbulent start to 2018 and volatility looks set to rise. It’s our responsibility to help members weather all sorts of markets to achieve decent, consistent returns on their pots. Commodities offer good value protection as inflationary pressures rise around the world and are supported by strong global trends.

‘CoreCommodity Management are best-in-class in this field and we’re delighted to have been able to work closely with them to design a portfolio that we believe will help improve members’ overall long-term risk adjusted returns.’

Adam De Chiara, co-founder of CoreCommodity Management said:

‘CoreCommodity Management is extremely pleased to have been awarded this significant mandate. We look forward to managing a customized real asset strategy that has been thoughtfully designed to provide portfolio diversification and inflation protection to NEST’s members in an ESG compliant format.’

The fund will be predominantly invested in commodity futures but will include a proportion of shares in companies involved in commodities production. It will be actively managed, aiming to outperform the Bloomberg Commodity Index. It will apply exclusions based on the methodology in NEST’s climate aware fund to avoid energy producers with the highest exposure to climate risk, including coal. It will also exclude producers focusing on thermal coal, palm oil, uranium, and tobacco, and on mining for cobalt from cobalt mines in the Democratic Republic of Congo, from both the futures and equity portfolios.  

For more information, please contact: 

Annie Bruzzone: +4420 3056 3657; annie.bruzzone@nestcorporation.org.uk

Information about NEST

We have over 6.9 million members. Members numbers include those that may have stopped contributing for some reason, for example they may have changed jobs and been enrolled into a different scheme; or are taking a contribution break. Member numbers exclude people who’ve opted out or left the scheme but include members still in their opt-out period. 
We’re looking after over £3.4 billion on behalf of our members.
Our opt-out rate is 8 per cent on average, and lower for younger members.
There are over 658,000 employers signed up to NEST, plus over 6,523 self-employed members. Employer numbers include employers that have set up their account with us but may not have enrolled any workers yet, for example some have set themselves up ahead of their staging, or are using their waiting period. 
NEST is a national defined contribution workplace pension scheme available to all employers to use to meet their workplace pension duties. It has a public service obligation to accept any employer, whatever their size, who wants to use the scheme to meet their duties.
NEST is designed around the needs of people who are largely new to pension saving, with clear communications, low charges and easy to use online tools and services. It’s run as a trust-based scheme in the interest of its members.

Information on CoreCommodity Management

CoreCommodity Management, LLC ("CoreCommodity") is a leading independent asset manager dedicated to providing diversified, risk managed exposure to commodities as an asset class. Founded in 2003, CoreCommodity manages approximately $4 billion across long-only and absolute return investment programs for institutional and retail investors globally. CoreCommodity co-founders are responsible for the design, launch and trading of the Dow Jones - AIG Commodity Index (now Bloomberg Commodity Index) and other commodity programs which contributed significantly to the adoption of commodities as an asset class. In 2005, CoreCommodity reconstituted the Reuters CRB index - now the Thomson Reuters/CoreCommodity CRB Index. www.CoreCommodityLLC.com