UK state-backed pension fund pledges £5bn to Australia’s IFM | USAEMALL.com

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The UK’s state-backed pension scheme has pledged to invest £5bn with Australian infrastructure giant IFM Investors, in a boost for chancellor Rachel Reeves as she pushes British pension funds to deploy assets in private markets.

National Employment Savings Trust (Nest) on Tuesday unveiled one of the biggest-ever private market commitments from a UK pension fund and said it would join 16 Australian funds in taking a stake in IFM, the world’s fourth-largest infrastructure investor.

Nest said it would start off seeding a Europe-focused infrastructure debt fund while also working on infrastructure and infrastructure technology-focused private equity, with an emphasis on UK investments. It will take a 10 per cent stake in Industry Super Holdings, the holding company for IFM.

The move comes as the UK government has been encouraging pension funds to increase their exposure to private markets, in the hope it will help boost Britain’s economy and provide better returns for savers. 

“We definitely want to have a UK bias . . . if we can help the UK economy and help create jobs then that’s good for our members,” said Mark Fawcett, chief executive officer at Nest, which has £49bn of assets.

Nest has pledged a 30 per cent allocation to private markets by the end of the decade, up from a current level of 17 per cent. About 40 per cent of the fund’s £8.5bn allocation to private markets is invested in the UK.

The average allocation to private equity and infrastructure across defined contribution pension funds is only 4 per cent, according to think-tank New Financial.

Nest’s partnership with IFM comes as the government has also encouraged England and Wales’s local government pension scheme to pool their assets with managers who run money themselves.

But Nest’s Fawcett said partnering with IFM enabled the pension scheme to accelerate its private market allocation and “deliver great value for our members”. 

“We outsource all of our fund management now . . . why wouldn’t we partner with one of the world’s best infrastructure and private markets managers?” he said.

“It’s that co-creation which is the key for allowing us to access world class investment capability at a price that is special for shareholders,” Fawcett said.

Nest invests with 11 private market managers including three for infrastructure, three for private credit, two for private equity and one timber fund.

In 2023, IFM committed to invest £10bn in British infrastructure and energy projects by 2027. The company has assets of AS$230bn (£115bn), with UK assets including the M6 toll road, telecoms company Arqiva and Manchester, Stansted, and East Midlands airports.

“It was great to see the growth agenda that the chancellor outlined that obviously supports a number of the areas that we would be particularly focused on in infrastructure, sustainable aviation fuels and the like,” said David Neal, chief executive officer at IFM. 

“This transaction really underlines that commitment that we have in the UK . . . this is our European headquarters and we’re opening a third floor in this building because of our growth here,” he added.