Interview – Mark Fawcett
INTERVIEW: MARK FAWCETT
“We are going to be one of the largest pension funds in the UK in the coming years.”
Nest chief investment officer Mark Fawcett speaks with Mona Dohle about managing rapid growth, the transition to a low car- bon economy and the sense of a common mission for auto enrolment providers .
Nest recently received Financial Conduct Authority (FCA) approval to launch Nest Invest as an occupational pension scheme. What will change as a result of that? Initially relatively little will change. There are two reasons for doing this. One, while good governance has always been at the heart of the way we have ran the scheme, we are getting bigger. We are going to be one of the largest pension funds in the UK in the coming years and we want to make sure the governance scales up with the organisation. Having a Nest Invest board as well as the FCA oversight helps us to make sure that the governance is well aligned with the scale that we are going to have.
In addition, and just as importantly, it will allow us to invest more flexibly in the coming years. As you are aware, we are now moving into private markets and there will be some co-investment oppor-
16 | portfolio institutional February 2020 | issue 90
tunities as a result. The Nest Invest struc- ture allows us to make decisions on those co-investments,
such as how much
money to commit. That is something we anticipate being able to do in the future. So it is about building up the knowledge base to do that. We now take in more than £400m a month. By setting up the OPS structure, we will have the flexibility to manage the cash using derivatives where appropriate to make sure we have sufficient portfolio management.
The third element is that we can give reg- ulated advice to our investment commit- tee. When we go through our manager selection exercise, which we have done for many years, in the past we had to get an investment consultant to sign it off. We don’t need to do that now. We continue to use investment consultants where we want additional special input, but it is not
a standard. So when we do a manager selection exercise now we can give regu- lated advice. It is about continuing to make sure that we have the resources and the capability to handle the scale of taking in £5bn a year.
What are the challenges in growing at such scale? We designed the scheme with a target date fund structure. We always designed it with a view that we needed to scale up. We have never gone into a niche asset that could only accept £1m or £2m over five years. But the scale is also creating opportuni- ties. Investing in private markets, for example, is something we couldn’t have done three years ago, apart from property which we’ve had for some time. Now we have discussions with fund managers
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