UK's Nest begins process of appointing fund managers to help its 12 million members invest in timberland; bidders will need to show they have a strong focus on sustainable forest management, and scale for Nest to maintain portfolio allocation consistency

LONDON , September 28, 2023 (press release) –

Following a robust market warming exercise, Nest has begun the formal process of appointing one or more fund managers to help its 12 million members invest in timberland (forestry) . 

Nest’s research into timberland has shown it will offer diversification for Nests funds, helping to optimise the risk/return profile of the scheme as it takes in £500 million net contributions on a monthly basis. 

Timberland is already a well-established asset class for institutional investors, particularly amongst US and European pension plans. Key reasons behind this:

• n the past timberland has shown low correlation with traditional stocks and bonds, helping investment performance even in turbulent markets. 
• It is resilient to shorter term-market dynamics; for example timberland managers can delay harvesting times if wood prices are low, leaving the trees to grow and until wood prices return to a level where it makes sense to harvest.
• Returns from timberland generally have a strong correlation to long term inflation trends. 

Commenting on the procurement launch, Stephen O’Neill, Head of Private Markets at Nest, said:

“We’ve been exploring ways to include natural capital investments into our portfolio as we continue to diversify our private markets allocation, take advantage of complex and scarce investment opportunities, and to decarbonise as we move closer to net zero targets. Timberland ticks all of these boxes. 

The performance of timberland speaks for itself. It’s offered stable total returns underpinned by strong cash yields and should play a complementary role in our portfolio alongside our other illiquid investments.

A core element to this procurement will be getting reassurance from bidders they have a strong focus on sustainable forest management, as well as having enough scale for Nest to maintain a consistent portfolio allocation.

We look forward to receiving the submissions and seeing how we can open up another asset class for our members.”

Fund managers looking to apply can do so through Nest’s Bravo platform.

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