The National Employment Savings Trust (Nest), the UK's largest state-backed pension scheme, has announced ambitious plans to inject up to £1bn into venture capital investments by 2030. This strategic shift is designed to bolster returns for its 14 million members and actively contribute to the nation's economic expansion, particularly through supporting high-growth private companies.
The initiative will commence with an initial allocation of £200m directed into Schroders Capital. This forms a significant part of Nest's broader strategy to increase its exposure to private markets, aiming to raise it from the current 19 per cent to 30 per cent of its substantial £68bn in managed assets over the next six years. Nest has already been investing in growth-stage companies since 2022, and this new push into venture capital is set to formalise and scale that existing approach.
This move aligns with broader calls from UK ministers and City executives for pension schemes to allocate a greater proportion of their assets to private markets. The rationale behind this push is two-fold: to enhance investment returns for pension savers and to stimulate domestic economic growth by providing much-needed capital to innovative UK businesses. Mark Fawcett, Chief Executive of Nest, confirmed the scheme's particular interest in unlisted UK businesses, noting that supporting UK innovation can drive job creation and economic growth across the country, a sentiment echoed by Nest's members.
Historically, venture capital has not been a prominent feature in the portfolios of UK pension schemes, especially for defined benefit schemes. This is primarily due to the illiquidity of such assets and the elevated risks associated with investing in early-stage companies. While defined contribution (DC) schemes are gradually increasing their activity in venture capital, it currently represents only approximately 0.5 per cent of total UK DC assets, according to UK Private Capital.
Michael Moore, chief executive of UK Private Capital, highlighted the significance of Nest's commitment. He stated that investments of this magnitude send a crucial signal to the market, underscoring a compelling investment case for UK innovation. Moore emphasised that a thriving pensions and venture capital ecosystem is essential for the UK to fully unlock the potential of its entrepreneurial economy.