UK-based pension scheme NEST has ramped up its infrastructure equity deployment with a £550 million ($768 million; €637 million) investment in two open-ended funds.
NEST, the UK’s largest workplace pension scheme, has invested about £400 million with CBRE Caledon Capital and a further £150 million with UK infrastructure pension pooling GLIL Infrastructure.
About two-thirds of its commitment to CBRE will be invested in the group’s open-ended CBRE Caledon Global Infrastructure Fund, while the remainder will be used for co-investments with the group, Stephen O’Neill, head of private markets at NEST, told Infrastructure Investor. The fund is believed to have about $5 billion in assets under management and earlier this month acquired US-based fibre network developer and operator WANRack.
The £150 million committed to GLIL, which invests in core infrastructure in the UK, brings the platform’s total funds raised by its pension fund members since 2015 to £2.5 billion. That includes £500 million raised from the existing members in January. A spokesman for GLIL said the NEST commitment is expected to grow to about £800 million by the end of the decade.
The two commitments add to the pension fund’s first infrastructure equity commitment made last month, when it invested £250 million with Octopus Renewables to target projects in the UK and Europe. O’Neill said the three investments fulfilled NEST’s desire to invest globally, in the UK and in renewables specifically.
“We believe we should invest globally, so we set the largest mandate as core-plus globally, but we also wanted levers to pull off the carbon risk, with the third lever being UK-based assets,” O’Neill explained. “GLIL gives us an almost unique ability to invest in assets that have a strong correlation to UK CPI.”
‘Boring’ is good
When asked by Infrastructure Investor what he believed attracted NEST to CBRE, the firm’s head of European infrastructure, Andreas Köttering, said CBRE’s focus on what he called ‘Infrastructure 2.0’ was particularly appealing.
“The world is going digital and there are enormous opportunities investing in digital infrastructure,” Köttering said. “In energy, this is very much focused on renewables and net zero, new and strengthened networks. Transport is seeing a shift away from a carbon footprint towards hydrogen and battery-propelled solutions.”
O’Neill, however, had somewhat more simplified praise for the CBRE approach.
“Infrastructure is a boring asset class. You want your infrastructure manager to be boring in their approach, so not trying to constantly push the envelope and redefine what infrastructure is and CBRE definitely have that very clear focus,” he said. “They are looking at what infrastructure will be tomorrow, but not in a way suddenly pushing up the risk profile.”
O’Neill added that given NEST’s growing membership, it had purposefully sought open-ended funds or platforms to make its infrastructure investments.
“We’re taking in £5 billion a year and our total AUM this year will grow by about 33 percent,” he said. “Investing in classic closed-ended funds with a total capacity of £500 million to £1 billion isn’t really useful, because if we make that investment today, we’d have to go out and find a new set of vintages of closed-ended funds next year.”
NEST made its first commitments to infrastructure in September 2019 via an investment with BlackRock. It issued a tender for unlisted infrastructure equity in January 2020.
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