UK's Nest awards Wellington £3.5bn EM mandate

UK pension fund Nest has handed a £3.5 billion ($6.7bn) mandate to Wellington Management to manage its emerging markets equity strategy, strengthening ESG risk evaluation and stewardship.

Following an internal review, Nest is moving its emerging markets equity allocation to an active, fundamental, discretionary approach, in a bid to invest more selectively 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 said.

The new strategy will leverage Wellington's proprietary fundamental research across countries, sectors and companies in emerging markets.

Nest Invest director of public and private markets Rachel Farrell said the pension fund continues to evolve its investment approach in ways it believes will drive benefit for members over the long term.

"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," Farrell said.

"This gives us greater control over how mandates are implemented and greater confidence in managing governance, sustainability, climate and market-specific risks."

Wellington Management head of EMEA Aisling Freiheit said the investment manager is delighted to partner with Nest on this important mandate.

"The most enduring relationships between asset owners and investment managers are built on trust, alignment and shared purpose," Freiheit said.

"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."

Engagement is an integral part of Wellington's fundamental research, and it believes active engagement with companies allows it to uncover both risks and opportunities within emerging markets.

"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," Farrell said.