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NEST Higher Risk Fund
As at June 2014
Fund facts
Name:
NEST Higher Risk Fund
Commentary
Fund objectives
• take more investment risk than the NEST Retirement
Mark Fawcett
Chief investment officer
Date Funds in pursuit of higher potential returns
The UK economy continued to provide
positive surprises in the quarter and
steady economic growth. As a result,
gilts bucked the global trend of falling
10 year yields on government bonds by
holding steady over the quarter, helped by modest growth in
the last month. Recent data has been a little softer but there’s
now some upward pressure on UK interest rates.
• target a long-term volatility average of 17 per cent
Contribution charge:
1.8%
The UK stock markets were subdued compared to global
markets, with the FTSE All Share growing by just 0.2 per cent
in the quarter compared with 3.7 per cent in the FTSE All
World Developed. This is due in part to the strength of sterling,
which rose by 3 per cent on a trade-weighted basis.
This fund is for NEST members who want to take more investment
risk through their savings career in order to seek higher returns.
These members will still need their fund to be lifestyled and so they
will be switched into the appropriate NEST Retirement Date Fund
10 years before their expected retirement date.
Annual
management charge/
Total expense ratio:
0.3%
By contrast, commercial property showed growth of 9 per
cent. We’ve reached our target weight for the LGIM Hybrid
Property Fund and so our members have had the full benefit
of this extra diversification.
Launch date:
July 2011
Total size of
underlying funds:
£3.0bn
Fund size:
£1.1m
Pricing basis:
Single price
Valuation and
dealing frequency:
Each working day
(excludes weekends and
bank holidays in the UK)
Fund administrator:
State Street Bank
Key points
This fund takes more
investment risk than
the NEST Retirement
Date Funds in pursuit
of higher potential
returns.
The European economy is lacklustre and interest rates remain
very low at 0.15 per cent. The central bank has introduced
stimulus measures including €400bn in lending finance for
banks and a cut in ECB deposit rates to -0.1 per cent. It also
raised the possibility of full-blown quantitative easing. In
response, Eurozone inflation has risen slightly over the quarter.
Emerging markets have shown strong growth over the quarter,
with the MSCI emerging markets index growing by 5 per cent.
This outstripped the MSCI World which grew by 4.4 per cent in
the same period.
We’re now adding emerging market equity assets to this fund
through the HSBC Global Investment Funds (GIF) Economic Scale
Index GEM Equity Fund. This fund buys shares in companies
based in the emerging markets in proportion to their relative
economic footprint as measured by certain fundamentals.
• reduce the likelihood of extreme investment shocks by
diversifying across a range of return-seeking asset classes
• gradually de-risk members’ investments as they
approach retirement
M2.HRF.06.2014
M2.HRF.12.2011
Risk measures
Last quarter
March 2014
This quarter
June 2014
Volatility
10.6%
10.1%
Value at risk
17.4%
16.6%
We monitor risk carefully using a variety of tools to make sure
the risk we’re taking in each fund is appropriately rewarded.
This table shows expected volatility and value at risk (VaR)
in this fund for the current and previous quarters. Changes in
these numbers could reflect a change to the amount of risk
we wish to take, changes in the risk profile of asset classes in
current conditions or a mix of both.
We’re currently underweight in emerging market equities
relative to their global capitalisation. We’ll add to our holdings
in this fund cautiously in the coming months, aiming for a target
M1.HRF.06.2014
holding allocation of between 5 and 10 per cent.
Asset allocation
M11.HRF.06.2014
Geographical breakdown of equity
64.7% Developed market equities
21.6% Property
3.3% Developed sovereign
debt (ex UK)
2.0% Emerging market equities
1.6% Emerging market
sovereign bonds
1.5% Investment grade
bonds (Global)
1.5% Developed market
small cap equities
1.3% High yield bonds
1.2% Inflation-linked
bonds (ex UK)
0.6% Money market investments
0.5% UK index-linked gilts
0.2% UK gilts
55.4% North America
8.5% Japan
17.6% Europe (ex UK)
0.7% Rest of world
8.7% Asia Pacific (ex Japan)
0.5% Latin and South America
8.6% UK
Not currently invested
For more information visit
nestpensions.org.uk
M3.HRF.06.2014
Shares make up 68.1 per cent of this fund. This breakdown shows the distribution
M9.HRF.06.2014
of the fund’s shareholdings across different geographical regions.
NEST Higher Risk Fund Continued
As at June 2014
Fund facts
Comparative risk
Investing responsibly
This chart broadly compares different NEST funds in terms of risk,
based on guidance given by the European Securities and Markets
Authority (ESMA). The chart uses categories of 1 (low risk) to
7 (high risk) corresponding to different ranges of volatility.
We believe that responsible, well-run companies offer superior
long-term value to investors. We exercise the voting rights that
come with share ownership to protect the interests of our savers.
NEST Higher Risk Fund (current position)
12 3
Important information
The value of investments may
go down as well as up and the
return of your investment is
not guaranteed. Fluctuations in
financial markets, currencies and
other risks may cause fluctuations
in the value of investments. Any
fund objective or target should not
be considered as a guarantee of
performance of any fund. Derivatives
may also be used for efficient
portfolio management purpose.
This factsheet does not constitute
advice on whether to invest in this
fund. Neither this factsheet nor any
data contained within this factsheet
is intended to constitute investment
advice or a recommendation to
make (or refrain from making) any
kind of investment decision and may
not be relied on as such. You may
wish to consult with an appropriately
qualified financial adviser in
relation to your investments
and any change to them.
4
5
6
NEST NEST
NEST 2055
Lower Pre-retirement Retirement
Growth
Fund
NEST
Ethical
7
NEST
Sharia
ESMA’s guidance suggests volatility should be calculated on
five-year historic performance. As NEST funds do not yet have
five years of performance the above chart is based on forwardlooking long-term volatility estimates. As our funds gain the
necessary performance history the chart will be updated to
reflect historic volatility in accordance with ESMA’s guidelines.
Annualised Volatility
1 = 0-0.5%
2 = 0.5-2%
3 = 2-5%
4 = 5-10%
5 = 10-15%
6 = 15-25%
7 = >25%
M10.HRF.06.2014
APPLE
1.5%
2
EXXON MOBIL
1.2%
3
GOOGLE
0.9%
4
MICROSOFT
0.8%
This factsheet has been created
by National Employment Savings
Trust (NEST). This factsheet is valid
as at the date of its publication.
5
JOHNSON & JOHNSON
0.8%
6
WELLS FARGO
0.8%
This factsheet and data contained
within this factsheet is provided
for information purposes only and
may not be reproduced or extracted
or used for any other purpose.
7
ROYAL DUTCH SHELL
0.7%
8
GENERAL ELECTRIC
0.7%
9
CHEVRON
No undertaking is given, or
representation or warranty is made,
express or implied, by NEST or by
any third party source that the
information in this document is
current, accurate, complete or error
free, and the information must not
be relied upon as such. Neither the
third party sources nor NEST accept
responsibility for any loss caused to
any recipient of this document as
a result of any error, inaccuracy or
incompleteness of this factsheet or
as a result of any third party data.
© NEST Corporation 2014
10
NESTLE
In this quarter we met with the audit committees from Wolseley
and Weir Group to discuss auditor tenure, independence,
re‑tendering and rotation, reflecting our view that robust audit
standards are crucial in protecting shareholders’ interests.
The second quarter of each year is a busy period when many
companies have their annual general meetings (AGMs). We
attended the Barclays AGM and have been sharing our voting
policy with our fund managers to help inform the way they
vote with our shares.
M19.HRF.06.2014
Sector breakdown of equity
Top 10 biggest shareholdings
1
This factsheet includes and/or is
based on data that is owned by
and obtained from third party
sources. Data from third party
sources is provided “as is” and is
not verified by NEST. Additional
disclaimers which apply to the third
party data are available on our
website www.nestpensions.org.uk.
Highlights this quarter:
In this quarter we met with the chairs of Barclays, Royal Bank
of Scotland and HSBC to discuss corporate culture, integrity,
ethics and trust. We’re also writing to non-UK banks urging
them to support a new UK banking standards council that
seeks to raise standards in the industry.
20.9% Financials
9.7% Energy
12.7% Information Technology
9.5% Consumer Staples
0.7%
12.0% Consumer Discretionary
6.0% Materials
0.7%
11.5% Industrials
3.5% Telecommunication Services
11.0% Health Care
3.3% Utilities
Shares make up 68.1 per cent of this fund. The weights shown below represent the
M14.HRF.06.2014
proportion of these holdings within this allocation.
Shares make up 68.1 per cent of this fund. This breakdown shows the distribution
M8.HRF.06.2014
of the fund’s shareholdings across GICS sectors.
Investment performance
Underlying funds
15%
UBS Life World Equity Tracker Fund
14%
13%
12%
11%
BlackRock Aquila Life Market
Advantage Fund
10%
9%
8%
7%
LGIM Hybrid Property Fund
6%
5%
4%
HSBC GIF Economic Scale
Index GEM Equity Fund
3%
2%
1%
0%
For more information visit
1 year
11.2%
3 years
–
5 years
–
Since launch
10.4%
nestpensions.org.uk
Annualised total return, net of annual management charge.
M13.HRF.06.2014
M16.HRF.06.2014