UK pension fund seeds €530m investment with IFM

Having finalised its partnership with IFM Investors just last week, UK pension fund Nest has confirmed its first major investment in the form of an infrastructure debt fund.

Nest confirmed it has now seeded its first major investment with IFM Investors through a new infrastructure debt fund worth €530 million ($930 million), focusing on the European market.

The announcement comes just days after Nest officially became a 10 per cent shareholder in IFM Investors and the investment manager’s first overseas investor – joining 15 local super funds in the ownership structure.

At the time, the UK pension fund stated it aimed to invest £5 billion ($10.4 billion) through IFM across infrastructure, debt and private equity by 2030, targeting UK private market investments in particular.

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In its first move towards this goal, Nest said this week the launch of the infrastructure debt fund further amplifies investments into private markets, including assets in the UK such as fibre, wind, waste to energy, bus or rail infrastructure.

Moreover, the deal supports both IFM’s global expansion into new investment opportunities and Nest’s desire to increase its allocation to private markets from 17 per cent to 30 per cent of assets under management by 2030, the UK’s largest pension fund said.

“Seeding this global infrastructure debt fund provides our members with access to diversified, world-class investment opportunities, and investments back in their communities and the infrastructure they use,” said Liz Fernando, Nest’s chief investment officer.

“We’re pleased to have taken this exciting first step with IFM, one of the world’s leading global infrastructure investment managers.

“We came together to develop sophisticated investment strategies like this one, and we look forward to co-creating more opportunities on behalf of our members.”

In particular, the new infrastructure debt fund will seek to deliver attractive relative value in sub-investment grade infrastructure, while also aiming to enhance risk-adjusted returns for Nest’s over 13 million UK members.

David Cooper, head of debt investments in EMEA at IFM Investors, said investing in infrastructure is integral to driving the digital economy, reducing carbon emissions and supporting the energy transition.

“Private debt capital is a key enabler – offering strong relative value for investors and, most importantly, their members,” Cooper said. “By partnering with organisations like Nest, IFM is working to deliver better retirement incomes for workers across the UK.”

It was first announced in February that IFM and Nest have entered into a binding agreement that would see the pension fund take a 10 per cent ownership stake in IFM parent company Industry Super Holdings and commit to significant ongoing investment.

At the time, IFM’s chief executive, David Neal, said the alliance would support its further expansion into new investment opportunities and markets across the world, especially in the UK.

Industry funds have actively been seeking international investment opportunities with some of IFM’s major shareholders, including AustralianSuper and Australian Retirement Trust, visiting the US earlier this year as part of a delegation aimed to showcase the investment potential of local funds.

While super funds acknowledge there are asset-specific opportunities domestically, they previously conceded that the narrowing prospects on the ASX have driven them to seek and deploy capital in other lucrative markets offshore.