State-backed pension scheme plans to pump £1bn into start-ups
The UK’s largest state backed pension scheme is planning to invest up to £1bn in venture capital by the end of the decade in a bid to boost returns for its members and fuel economic growth.
The National Employment Savings Trust, dubbed Nest, said its plans to expand into high-growth private companies will begin with a £200m allocation into Schroders Capital.
The decision by Nest, which boasts 14m members and receives around £700m in monthly contributions, is part of its efforts to widen its exposure to private markets from 19 per cent to 30 per cent of its assets by 2030.
Nest, which manages £68bn in assets, has invested in growth-stage companies since 2022, with the new push into venture capital anticipated to “formalise and scale this approach”.
The move comes as both UK ministers and City executives push for higher pension asset allocations into private markets in a bid to boost returns and stimulate domestic economic growth.
New opportunities
Chief executive of Nest, Mark Fawcett, confirmed the pension scheme is eyeing “opportunities” in unlisted UK businesses as part of its entry to venture capital.
“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,” he said. “We also expect a significant proportion of these investments to be in UK-based companies, something our members tell us they want.”
Venture capital has not typically been a large fixture of UK pension schemes’ portfolios, especially for defined benefit schemes, due to the illiquidity of the assets and the increased risk associated with early-stage companies.
While defined contribution (DC) schemes are becoming more active in investing in venture capital, it represents only roughly 0.5 per cent of UK DC assets, according to UK Private Capital.
Michael Moore, chief executive of UK Private Capital, said: “Commitments of this scale send an important signal to the market that there is a compelling investment case for UK innovation.
“A thriving pensions and VC ecosystem will be essential if the UK is to unlock the full potential of our entrepreneurial economy.”