National Employment Savings Trust, London, hired CoreCommodity Management to run up to 5%, or a £135 million ($179 million), allocation, said Mark Fawcett, chief investment officer for the £2.7 billion multiemployer defined contribution plan, during a news conference July 12.
In an effort to boost diversification and facilitate inflation hedging, NEST introduced commodities into its default's allocation for the first time via a segregated mandate that invests 80% in commodity futures and 20% in commodity-producing companies' stock, Mr. Fawcett said.
Funding comes partly from real estate and partly from cash and short-duration bond investments, Mr. Fawcett said.
NEST will actively screen commodity producers for environmental, social and governance requirements, Mr. Fawcett said.
"As we are fast approaching being one of the biggest (plans in the U.K.), we're able to harness that growth to cost-effectively access new sources of return without increasing (participants') investment risk,"Mr. Fawcett said separately in a news release. "While markets have been benign since auto enrollment kicked off six years ago, we've had a turbulent start to 2018 and volatility looks set to rise. It's our responsibility to help (participants)weather all sorts of markets to achieve decent, consistent returns on their pots. Commodities offer good value protection as inflationary pressures rise around the world and are supported by strong global trends," Mr. Fawcett added.