Nest pension shifts £4B to Wellington for active equity management

Nest: Nest is Britain's largest workplace pension scheme, into which millions of workers are automatically enrolled. It recently awarded its full emerging market equities mandate to Wellington Management, shifting from a passive approach used for more than a decade to an active strategy aimed at improving engagement on sustainability issues. The scheme's director highlighted that passive holdings limited influence over companies on matters such as climate change and governance. Rachel Farrell: Rachel Farrell is Nest's director of public and private markets. She stated that a pure passive approach was insufficient for meaningful engagement with companies on sustainability risks and explained the decision to move to a more focused active strategy after a periodic mandate review. Wellington Management: Wellington Management is a US-based active investment manager overseeing substantial assets across global markets, including emerging market equities. It was selected by Nest following an internal review to run a concentrated portfolio benchmarked to the MSCI Emerging Markets index, with a focus on delivering added value in less efficient markets through stock selection and ownership influence. Active Management Trend: UK pension schemes including the People's Pension have recently shifted emerging market equity allocations toward active or quantitative strategies to enhance engagement capabilities. Sustainability Engagement: Pension schemes are increasing focus on influencing portfolio companies regarding climate change, diversity, workers' rights and other governance factors that may affect long-term returns. Emerging Markets Opportunity: Emerging markets are seen as offering scope for active managers to add value through targeted stock selection due to lower market efficiency compared with developed markets.