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Nest, the state-backed UK pension scheme, is planning to invest up to £1bn in venture capital as it seeks to increase British savers’ exposure to potentially high-growth private assets.
The National Employment Savings Trust, which is the UK’s largest workplace pension scheme, said it would allocate £200mn to Schroders Capital as a first step.
The move by Nest, which has 14mn members and receives about £700mn in monthly contributions, is part of an effort to increase its exposure to private markets from 19 to 30 per cent of its assets by 2030.
“We’re really keen on trying to capture . . . high-growth opportunities. [We] felt that we could move earlier in the private equity cycle [by investing in] middle- and late-stage ventures,” said Mark Fawcett, chief executive of Nest Invest, the scheme’s regulated investment subsidiary.
The move comes as UK ministers and City of London executives push for a higher allocation of pension assets into private markets to boost returns and support UK businesses by focusing on domestic investments.
The push coincides with wider jitters in parts of private markets, including private credit, which have fuelled concern about the quality of some assets and the risks for pension savers.
Separately, Nest announced in April that it would deploy £450mn into private credit loans to US companies through specialist manager Crescent Capital, which manages $50bn in assets.
The latest allocation covers some existing venture investments and provides fresh capital for new late-stage opportunities. These VC investments will be part of a larger existing £1.5bn mandate with Schroders for private equity assets.
As of May, private equity accounted for 5 per cent of Nest’s total of £68bn assets under management. Around 44 per cent of its private assets investments are in the UK, including an investment in autonomous driving group Wayve.
The start-up, which was valued at $8.6bn in a funding round in February, will on Wednesday become the first major company to sell shares on LSEG’s new private markets system.
Nest said that if enough opportunities were available, its allocation to venture capital would reach roughly £1bn by 2030, focusing heavily on unlisted UK businesses.
Venture capital has not been a significant part of UK pension schemes’ portfolios in the past, especially for defined benefit schemes.
“One of the reasons is that VC is small, so you can’t scale it. It’s also highly uncertain [in terms of returns] and very risky,” said Simeon Willis, CIO of pension consultancy XPS in London.
Within the defined contribution sector there has been more investment in private assets. “We’re seeing more [VC investment by] DC pension schemes. I’d say it’s early days,” Willis said.
“As a large, long-term investor, Nest is well positioned to support ambitious private companies,” said Fawcett. “Support for UK innovation can drive job creation and economic growth across the country. Over the coming years, we will build a more meaningful allocation to late-stage venture capital.”
