Nest appoints Wellington Management to advance emerging markets equity strategy

Nest, the £68 billion pension scheme, today announced a progressive shift in its emerging markets equity strategy to strengthen ESG risk evaluation and stewardship, appointing Wellington Management (Wellington) to manage its equites portfolio within the asset class.

Following an internal review, Nest is moving its emerging markets equity allocation to an active, fundamental, discretionary approach, allowing for more selective investment in companies with strong growth prospects. This enables more selective investment in companies with robust ESG practices and strong growth potential. The move reinforces and supports Nest’s commitment to delivering strong, risk-adjusted returns for members over the long-term.

Nest has committed £3.5bn to Wellington for this mandate. The new strategy will leverage Wellington’s deep, proprietary fundamental research across countries, sectors and companies in emerging markets.

To deepen the engagement with companies held within Nest’s emerging markets portfolio, the new strategy is expected to hold between 100 and 150 stocks, providing broad diversification across countries and sectors. This more focused approach, combined with analyst-led and regionally informed stewardship, will provide deeper, on-the-ground understanding of emerging market companies. Backed by Wellington’s strong stock-selection capabilities, disciplined risk management and integrated ESG and climate research, the strategy is well positioned to identify attractive long-term opportunities and help deliver value for members.

Commenting on the appointment, Rachel Farrell, Director of Public and Private Markets at Nest Invest, said:

“Our members are at the heart of every investment decision we made. This strategic shift in our emerging markets equity strategy demonstrates how we continue to evolve our investment approach in ways that we believe will drive benefit for our members over the long term.

“We’re excited to partner with Wellington, which puts engagement to the centre of its investment philosophy. Its focus on high-quality companies with strong governance in emerging markets shows a clear, strong alignment with Nest’s long-term investment goals and beliefs.

“With more than 80% of assets held in segregated accounts, including this emerging markets mandate with Wellington, Nest has developed one of the most extensive segregated mandate programmes in the UK defined contribution (DC) market. This gives us greater control over how mandates are implemented and greater confidence in managing governance, sustainability, climate and market-specific risks.”

Engagement is an integral part of Wellington’s fundamental research and an important source of investment insight. Wellington believes active engagement with companies allows it to uncover both risks and opportunities within emerging markets. Wellington seeks to understand how management approaches financially-material sustainability issues and assesses both responsiveness to feedback and willingness to improve. This constructive dialogue provides insight into management quality, governance, and execution – factors they consider critical to its investment decisions. Drawing on its regional expertise, Wellington takes a company-specific approach that reflects the diversity of local market dynamics and stages of development across emerging markets, using ongoing engagement to support companies’ progress on material issues over time. Wellington believes this depth of engagement can strengthen investment conviction and support better long-term investment outcomes for Nest’s members.

Aisling Freiheit, Head of EMEA at Wellington Management, said:

“We are delighted to partner with Nest on this important mandate. Nest is one of the UK's leading pension schemes, with a clear commitment to delivering strong long-term outcomes for its members, and we are proud to support that mission.

The most enduring relationships between asset owners and investment managers are built on trust, alignment and shared purpose. We look forward to working closely with Nest over the years ahead, bringing the full breadth of Wellington's global platform to support its long-term ambitions and create lasting value for its members.”