Nest Pension Transfers £3.5 Billion EM Equities to Wellington for Active Management
Overview of Nest's Emerging Market Equities Strategy Shift
By Simon Jessop
Background and Rationale for the Move
LONDON, Oct. 1 (Reuters) - Britain's largest workplace pension scheme Nest has moved its entire £3.5 billion ($4.6 billion) in emerging market equities to US active manager Wellington Management, ending a focus on index investing to better manage sustainability risks, an executive told Reuters.
Nest, the £68 billion scheme into which more than 14 million workers are automatically enrolled, had invested the money passively for more than a decade, echoing a global market trend in which trillions of dollars have followed suit to save on fees.
After awarding its first emerging market passive mandate to Northern Trust in 2014, Nest moved to the manager's Climate Aware Emerging Markets Equity Strategy in 2021.
Limitations of Passive Investing
Doing so left the scheme with a smaller stake in more than 1,000 stocks, limiting its ability to engage with firms on climate change, diversity, workers' rights and other sustainability issues that could impact long-term returns.
By moving to a more focused portfolio of around 100-150 stocks, the scheme hopes to better influence governance at the companies, Rachel Farrell, Nest's director of public and private markets, said in an interview.
"A pure passive approach... just wasn't engaged enough," Farrell said. "We weren't really spending time understanding each of the stocks that we would own in our members' portfolios."
"To influence as a shareholder, you need to be an important owner of that particular company," she added, without disclosing the costs of making the switch.
Impact on Wellington Management
Significance of the Mandate
WIN FOR WELLINGTON
The decision is a big win for US investor Wellington, which manages $1.3 trillion in assets, of which $44 billion is in emerging market equities.
Review Process and Performance Targets
Farrell said the decision to move the mandate followed a periodic internal review begun in 2024, and that the passive strategy had met its return objectives, without disclosing details.
The new strategy will be benchmarked to the MSCI Emerging Market index and Wellington will target an additional 100 basis points in outperformance, Farrell said.
"Emerging Markets is one of the markets that is somewhat less efficient," she said. "There is evidence that an active manager can add value."
Market Context and Broader Trends
Performance of Emerging Market Equities
BULLISH EMERGING MARKETS
The MSCI Emerging Market index is up 22% year to date, outperforming the developed market MSCI World Index, which is up 9%.
Emerging market demand picked up in the second half of 2025 following large outflows since 2021, fund firm Ashmore said in a February report, in which it put total EM equity assets at $1.4 trillion, equivalent to the market value of automaker Tesla.
Nest's Position and Industry Movements
Nest has around 5.2% of its assets in emerging market equities with the bulk in a systematic developed markets strategy.
The decision by Nest follows a move last year by the People's Pension to move its index-tracking emerging markets equity allocation to a more active quantitatively driven strategy.
Future Outlook for Nest and the UK Pension Market
A third of Britain's working population is currently invested with Nest and that is expected to grow to half of the workforce by 2030, Nest said. Taking in around £700 million a month, total assets will near £100 billion by 2030, it added.
($1 = 0.7542 pounds)
(Reporting by Simon Jessop; Editing by Jonathan Spicer )
