Mr Hunt argues that the arrangement with the pension fund could increase the post-retirement income of the typical income earner by more than £1000 a year over their career.
“British pensioners should benefit from the success of British businesses.
“This also means increased investment in the most promising companies, driving growth in the UK.”
But the government’s own internal modeling suggests that the very high fees charged by private equity firms could negate the benefits of pension savers.
An analysis by the Department of Work and Pensions found that high performance fees could make the lives of savers investing in private companies £1,300 worse.
Fawcett claimed that Nest “in principle” did not get paid to appear.
He added: “All investments will fall within our existing fee structure. This competitive fee structure will also increase our chances of meeting our goals for net investment return.”
Why We Invest UK Pension Funds In Solar Plants And Fish And Chip Shops
National Employment Savings Trust (Nest) Chief Investment Officer Mark Fawcett
His speech at the prime minister’s official residence in July attracted a great deal of attention within the pension industry. Notably, the UK’s major defined contribution (DC) investors have signed an agreement to invest 5% of their portfolios in unlisted stocks.
Some have questioned whether the UK DC scheme can or should invest in unlisted equities.
Our view as signatories to the Compact is simple. We don’t want to miss out on an asset class where Nest members are very popular.
There are good reasons why large pension plans around the world are adopting private equity. Broadly speaking, historical average returns in private equity have been significantly higher than public equities for most of the time.
At Nest, we considered a wide range of factors and data to support our private equity investment decisions. If we can achieve at least the average return, it is clear that the total return of this plan will improve.
Our focus has been on acquisitions of growth stage companies and small/mid caps. These areas are believed to provide the highest risk-adjusted returns.
Since we began investing in private equity in 2022, we have invested in companies across industries.
One example is Captain D’s, a seafood restaurant chain that serves American gourmets with the classic British soul food of fish and chips. After 50 years of operation, last year it was looking for further investments to continue its expansion.
Another deal Nest has struck is with Indian pharmaceutical company Sekhmet, one of the world’s largest suppliers of generic drugs. Both are very different companies, but both are exciting investment opportunities.
Private equity assets offer an attractive combination of less valuation volatility and higher expected returns than liquid assets. This combination is naturally desirable for long-term institutional investors.
