Nest opts for ‘active, discretionary’ approach with $3.5bn EM segregated mandate

Nest, the UK’s largest workplace pensions provider, has appointed Wellington Management to manage a £3.5bn emerging markets equities strategy. Nest says the decision was taken following an internal review and is intended to strengthen ESG risk management.

In a statement, the £68bn pension scheme said it is moving its emerging markets equity strategy to a more ‘active, fundamental, discretionary approach’. Rachel Farrell, Nest’s director of public and private markets says the decision is in the best long-term financial interests of Nest’s 14m members.

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“This strategic shift in our emerging markets equity strategy demonstrates how we continue to evolve our investment approach in ways that we believe will drive benefit for our members over the long term”, she commented.

Segregated mandates

Wellington’s appointment is the latest in Nest’s push for segregated mandates.

Earlier this year, the pension scheme launched a search for a global ethical equity mandate. Here too, the mandate was segregated and customised to Nest’s ethical investment beliefs. Nest awarded its inaugural segregated mandate back in 2018 – a commodities mandate awarded to CoreCommodity Management.

Over 80% of Nest’s assets are now under segregated mandates. “This gives us greater control over how mandates are implemented and greater confidence in managing governance, sustainability, climate and market-specific risks”, explains Farrell.

Engaging EMs

Additionally, the decision to appoint Wellington was motivated by Nest’s preference for engagement and stewardship. According to its statement, the pension scheme was looking to deepen company-level engagement within its emerging markets portfolio.

The strategy is expected to hold between 100 and 150 stocks while maintaining on-the-ground stewardship. “We’re excited to partner with Wellington, which puts engagement to the centre of its investment philosophy. Its focus on high-quality companies with strong governance in emerging markets shows a clear, strong alignment with Nest’s long-term investment goals and beliefs”, Farrell notes.

According to its latest disclosures, Wellington held over 18,600 meetings with 5000 public market issuers last year. Climate-related engagements accounted for 13% of these conversations with governance issues taking centre stage (87%).

“The most enduring relationships between asset owners and investment managers are built on trust, alignment and shared purpose”, commented Aisling Freiheit, Wellington’s head of EMEA.

The appointment also aligns with Nest’s emerging market investment beliefs. The scheme’s largest exposure to EM equities is through its higher risk fund (7.3%), compared to 4.7% for the 2045 retirement date fund.

According to its climate investment disclosures, the scheme recognises that EM equities are more exposed to physical climate risks. This recognition not only led to a re-underwriting of the asset class in 2025 but also yielded a shift in asset manager expectations of which this appointment is a reflection.