The National Employment Savings Trust’s (NEST) first foray into infrastructure is likely to be through a blended fund investing in both listed and direct infrastructure, chief investment officer (CIO) Mark Fawcett said.
Speaking at the National Association of Pension Funds Investment Strategies Conference 2013, Fawcett said while the scheme had been in talks with the NAPF about the Pensions Infrastructure Platform – as revealed by portfolio institutional in March – there was a difference in the frequency of the cashflows between the scheme and the PIP.
This, he added, meant a blended fund combining both listed and unlisted infrastructure assets would be “the model” to adapt.
He said: “We have continuous cashflows, but the platform will have lumpy cashflows. Listed and unlisted would be the model and infrastructure would be perfectly reasonable for that structure.”
However, Fawcett said NEST needed to remain low cost so the real challenge was to find the right manager who could offer low fees.“We are not in the business of paying two-and-20”.
NEST recently opted for the blended approach for its property allocation, gaining exposure to listed and unlisted property through Legal & General Investment Management’s (LGIM’s) Managed Property fund and Global Real Estate Equity Index fund respectively.
NEST currently has 20% of its portfolio in property, but this allocation will include infrastructure when the right manager is found, said Fawcett.
“Real assets make a lot of sense to us. About 20% is a reasonable asset allocation to real assets, but that could well vary over time as our asset allocation is not static,” he added.
Fawcett also spoke of establishing an internal market at NEST for older members who needed liquidity to purchase an annuity or enter into drawdown selling assets to younger members who had small pots with cash coming in and could take on more illiquidity.
He said NEST was working with another pension fund that had already set up an everyday proxy to come up with a price for infrastructure assets using an index which tracked the daily price movement.
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