Nest has expanded its private market strategy by launching a new £200m dedicated venture capital ‘sleeve’, with Schroders Capital.
Nest, the UK’s largest master trust, has been invested in growth-stage companies and venture capital with Schroders Capital since 2022. But it says this new sleeve enables it to formalise and scale this approach.
Nest will initially allocate £200m to Schroders Capital on behalf of its 14 million members, incorporating existing venture investments and providing fresh capital for new late-stage VC opportunities.
Examples of UK companies Schroders Capital has already invested in on behalf of Nest, now sitting in its new VC portfolio, include Wayve, the company developing AI software for autonomous driving, and Synthesis, a leader in AI video creation.
Nest adds that it expects its VC exposure to increase over time in line with its broader investment strategy. It adds that subject to sufficient availability of high-quality investment opportunities, this allocation could reach around £1 billion by 2030, with a strong focus on UK-based unlisted companies.
It adds that this suppress the schemes ambition to grow its private markets exposure up to 30 per cent by 2030.
Nest says that its recent Member Assembly report makes clear the desire from the pension scheme’s members to be investing into deals like VC, particularly those based in the UK.
Nest Invest CEO Mark Fawcett says: “As Nest has grown, we have continued to evolve our investment approach, opening up new investment opportunities for our members. We are delighted to expand this approach further into venture capital, providing injections of cash that growing businesses need to scale.
“As a large, long-term investor, Nest is well positioned to support ambitious private companies. Our members save with us over decades, which allows us to invest patiently and back innovation through different stages of growth.
“We are particularly drawn to opportunities in the UK business sector, where 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, giving our 14 million members access to the long-term growth potential that innovative, high-growth companies can offer.”
He adds: “To this end, we are delighted to deepen our partnership with Schroders Capital. Their capabilities across venture and growth investing, combined with their experience investing across the full business lifecycle, make them a strong partner for this strategy. We also expect a significant proportion of these investments to be in UK-based companies, something our members tell us they want.”
This announcement is in line with DC pensions schemes commitments under the Mansion House Accord, and was welcomed by Torsten Bell, Minister for Pensions. Bell says: “Britain creates some of the best, most innovative new companies in the world.
“By channelling pension savings into high-growth UK companies, Nest is backing the entrepreneurs and innovators driving jobs and growth across the country, while delivering better long-term returns for its members.”
Schroders Capital head of private equity investments Tim Creed adds: “The combination of Nest’s long-term investment horizon and Schroders Capital’s private markets expertise creates a strong platform to identify and support the scaling of high-quality growth companies.
“The UK is already Europe’s largest venture hub, and the world’s third largest. It is one of the most efficient venture ecosystems globally, growing unicorns at pace – however, domestic capital has not historically participated at the same rate.
“As a global innovation leader, the UK has a significant and largely untapped opportunity to bring this growth to pension portfolios. By increasing pension fund and institutional participation in the UK venture market, we can unlock compelling opportunities for millions of UK savers – while supporting the next generation of scale-ups and retaining more value within the UK economy.”
UK Private Capital chief executive Michael Moore adds: “Nest’s announcement is a significant and welcome milestone for the UK venture capital market. It demonstrates growing confidence that backing innovative, high-growth businesses can deliver attractive long-term returns for pension savers while supporting the UK’s future economic growth.
“Commitments of this scale send an important signal to the market that there is a compelling investment case for UK innovation, and we hope it encourages other pension schemes to accelerate their own plans to invest in private capital.
“The prize now is to build on this momentum. Alongside direct investment programmes, it is vital that more pension capital reaches the specialist venture and growth funds that have the expertise and track records to identify, back and scale the next generation of British success stories. A thriving pensions and VC ecosystem will be essential if the UK is to unlock the full potential of our entrepreneurial economy.”