Nest has placed adverts inviting tenders for investment management services for five different funds in the Official Journal of the European Union.
The five mandates are for pooled passive funds across global equity, UK fixed interest gilts, UK index-linked gilts, low-risk cash management and a diversified Beta option.
Nest says the funds will form the basis for the target date funds that will make up the default fund offering.
The total amount that Nest invests via any of these mandates has not been fixed. Nest trustees are due confirm the investment strategy, and publish the Statement of Investment Principles, in the next few months.
The tender document says the pooled global equity fund will be benchmarked against either MSCI world or FTSE world indices. The passive UK gilts Fund will be benchmarked against the FTSE Actuaries All Stocks Index, and the UK index-linked gilts fund will be benchmarked against the FTSE actuaries over 5 years index linked Gilt Index.
The low-risk cash management fund will be benchmarked against GBP 7 day LIBID. The diversified Beta mandate will have low exposure to developed market equities, gilts, index linked gilts and cash. Nest says suitable funds may well have various targets but as a guide, a typical performance target would be a UK risk free rate plus 2-4 per cent pa. Examples of funds which are likely to be suitable include diversified beta/growth funds and diversified alternative/completion funds.
Clive Grimley, partner at Barnett Waddingham says: “The communication challenge facing NEST should not be underestimated. No doubt the fund choice will not be presented using this language, but communicating the concept of a diversified beta fund to someone who has never held any investments in the past and may not even have a bank account will be difficult.
“Particularly because most of the communication is likely to be online as the target audience of mainly micro employers and lower paid employees will not normally have
