The biggest challenge and opportunity for superannuation, pension and sovereign wealth funds is the climbing support ratio, particularly in developed economies, according to Michael Davis, head of global retirement strategy at T. Rowe Price.

The support ratio, sometimes referred to in less flattering terms as the old-age dependency ratio, has been in rising across every major global economy. For example, in Japan, the support ratio is 51, meaning 100 working adults support 51 retirees. In the 1950s, the ratio was eight.

In the US, from where Davis hails, the ratio has steadily climbed to 33, sparking commentators to label this demographic dynamic, The Silver Tsunami.

Michael Davis

Add to the mix, rising life expectancy, falling birth rates, and tighter migration policies restricting the flow of labour, and the result is pay-as-you-go (PAYG) pension systems under enormous pressure.

“PAYG systems have provided a tremendous amount of security for individuals around the world for many, many years but they are under immense financial pressure,” Davis says.

“The same is true of defined benefit (DB) systems because people are living longer and the cost of defined benefit plans just keep going up without clarity or certainty around the ability of governments to fund them.”

To manage this pressure, countries have three options: increase taxes, slash benefits, or shift from the PAYG model towards advanced funding and private savings.

“It’s inevitable that private savings will be a bigger part of the equation,” Davis says.

“Culture and language are idiosyncratic but maths is universal, and the maths suggest that private savings are required to provide individuals with the level of retirement security that they are seeking and deserve.”

While private savings, which include defined contribution (DC) funds, represent the majority of super and pension assets in countries like the United States and Australia, in many other countries, DB funds still dominate the landscape.

“Over time, every country will inevitably go down the path of more private savings,” Davis says.

“Depending on the country, the velocity of their journey will differ but given the longevity trends, it’s simple maths.”

Shang Wu, portfolio manager, retirement strategy at Australia’s Aware Super, agrees that private savings will play an increasingly important role globally in helping people get the best possible income in retirement, adding that Australia has a unique opportunity to play a leadership role being a mature, largely defined contribution system.

According to Wu, the retirement income challenges facing super funds can be split into two categories: near-term and longer-term.

The near-term challenge is closing the advice gap, particularly as members move from accumulation to decumulation and seek help converting their superannuation balance into an income stream.

“We know that quality advice can make a real difference, but advice needs to be affordable and scalable, and that’s a big challenge,” he says.

When it comes to advice, Aware Super has a hybrid model that blends human and digital interaction. In the year to June 30, 2025, the fund assisted over 100,000 members to set up a retirement plan for no additional cost.

At the over £50 billion UK workplace pension scheme, Nest, where the average member earns £24,000 per annum and retires with a modest account balance, most will not seek advice, highlighting the important role that funds play in supporting all members to achieve good retirement outcomes, says Gareth Turner, head of strategic investment projects at Nest.

“Our members want to use their Nest savings for a lifelong income akin to wage replacement and because they are not necessarily going to get financial advice, they want a lot of support from their scheme to provide them with that lifelong income,” he says.

Nest has developed a retirement income blueprint, which proposes a core default pathway for members transitioning from accumulation to decumulation with the scheme making decisions on matters such as a sustainable withdrawal rate and longevity protection.

“Members can access something like a wage replacement without being burdened with complex decisions about how to manage this on their own,” Turner says.

If closing the advice gap is the industry’s near-term challenge, Wu says the longer-term challenge is investing portfolios for retirement.

“It may not be the most pressing, urgent problem right now because most funds still have the majority of assets in accumulation but as demographic changes accelerate, asset owners will need to demonstrate their ability to invest for members’ retirement,” Wu says.

“As pension funds, our role is very different to fund managers who serve institutional investors. Our job is to help members achieve their retirement dreams and we need to invest for that purpose.”

Davis, a former deputy assistant secretary of Labor, Retirement Oversight Division for the Obama Administration, says government and industry must “partner” to ensure public policy that builds national savings and maximises income and confidence in retirement.

He cites three key areas where government can play a greater role: product choice (there should be less); retirement income (there should be more); and access to affordable financial advice.

When it comes to choice, workers should ideally have between 8 and 14 investment options, Davis says, adding that limiting options encourages people to make better decisions.

“Things are going to have to be simpler, particularly for retirement incomes, because managing decumulation is so much more complicated than accumulation,” Davis says.

“Governments need help to design a system that provides curated choices. Also access to advice is important because these are not simple questions and problems, and people need help to address them.”

On the subject of retirement, Davis cites Australia’s Retirement Income Covenant, which places a legal obligation on superannuation funds to assist members in retirement, as a step in the right direction.

Shang Wu

Shang describes the retirement income covenant as a “gamechanger” that has prompted Australian funds to focus on retirement and, as a result, accelerated innovation.

While there is no federal mandate in the US for funds to provide a retirement income solution, Davis believes that the government should make it “easier” for the industry to provide retirement products by providing “more safe harbors” in regulation.

“Something that has stuck with me from my experience in government is the important role that government plays in creating urgency to solve national issues,” Davis says.

“Looking at Australia, the Retirement Income Covenant has created a sharp focus on that issue across the system and if we see more of that [globally], we’ll get these problems solved more quickly.”

As for the Trump Administration’s move to encourage America’s 401(k) plans to invest more in private assets to increase the sophistication, diversification and performance of the country’s vast $8.9 trillion DC asset pool, Davis says all investments and managers must compete on merit.

“Private assets, like any asset class, have to earn their place and deliver a mix of risk and return parameters that add to the overall portfolio,” he says.

“There is a compelling investment case, as other countries have realised, but there are headwinds too including fees, liquidity and operational complexity.

“Another consideration, particularly in the US, is litigation, which makes [DC] funds more reticent to take on higher risk and fees.”

Aware Super has been a significant investor in alternatives and unlisted assets for many years.

Shang says the case for private assets is as strong in retirement as it is in accumulation.

“Private assets have a key role to play in a diversified portfolio because of their unique risk and return profile and that doesn’t change because you move into retirement,” he says.

“There are liquidity issues to manage but we’ve proven our ability to manage the liquidity of private assets and that capability has been tested in both up and down markets.”

Inflation poses a significant long-term global challenge for investors and Davis says greater diversification is critical for retirees to maintain their purchasing power.

“Multi-asset solutions will have to be a central part of the equation,” he says.

“We need to be open to the possibility of a national default policy that encourages people into diversified solutions with professional fund managers making asset allocation decisions.”

Understanding and managing trade-offs

To support the industry to understand and address the retirement income challenge, T. Rowe Price developed a five-dimensional framework for exploring retirement income needs and potential solutions.

The manager’s 5D framework establishes the foundational attributes of the “in retirement experience” for individual investors and quantifies the economic tradeoffs between these attributes.

The five attributes are longevity risk hedge, level of payments, volatility of payments, liquidity of balance, and unexpected balance depletion.

“Often these attributes and parameters are presented individually but there are tradeoffs that members and individuals need to make when selecting a retirement solution that is right for them,” Davis says.

“Our framework is extremely robust because it incorporates market research that required survey participants to make those tradeoffs to give us a better signal of what people really want and value.”

Nest’s retirement income blueprint seeks to help members manage those tradeoffs.

It proposes to blend three strategies together.

The first is a flexible income account which would be invested in capital markets, comprising the majority of members’ assets and provide a regular income from around state pension age until an advanced point in retirement, such as age 85.

This would be flexible and liquid, allowing members to change their mind about how they’re managing their retirement savings if they wish to.

Second, to manage longevity risk, the scheme would use a small percentage of the pot and, at a mid-point in retirement, circa age 75, invest in a longevity risk pooling mechanism, such as a bulk deferred annuity.

This would begin paying out around ten years later, at the point that the income from the flexible income account has been exhausted and provide members a secure income for the rest of their lives.

Third, members could have access to a savings account to save for emergencies, across their retirement.

“Members would see a sustainable income provided to them by Nest and, in the background, we would be blending strategies together to deliver that income to them,” Turner says.

“Members want flexibility early on in retirement but, later on, they are willing to trade off that flexibility for security. Our members really want a lifelong income stream.”

The desire for a lifelong, guaranteed income stream is universal, according to research conducted by T. Rowe Price.

“That makes sense because many people are coming from a DB environment where there is a consistent payment stream and guarantee of sorts,” Davis says.

“Across the board, people want as much protection as they can get but the question is always how much are they willing to pay for that guarantee.”

For super funds that want to better understand and meet the unique needs of their member-base, T. Rowe Price’s 5D framework aims to narrow down the retirement income universe for the solutions best suited for specific cohorts.

Published in partnership with T. Rowe Price.

 

The Global Pension Transparency Benchmark has been the driving force behind global pension funds’ improved transparency of disclosures, with 92 per cent of the 75 funds measured improving their transparency scores during the project’s lifespan. 

A collaboration between Top1000funds.com and CEM Benchmarking, the GPTB began with the ambition of holding pension funds to account on their openness of disclosures and has evolved into the yardstick for the transparency of global asset owners with key stakeholders.  

Between 2021 and 2025, the project collected more than 11,000 data points per year across 15 countries and the five largest pension funds in each jurisdiction, assessing the transparency of disclosures around the chosen value drivers of cost, governance, performance and responsible investing.  

The five-year results underscore the GPTB’s impact and many pension funds’ drive for betterment. 

At the country level, all 15 nations’ pension funds made progress. Australia, which has more than A$4 trillion ($3.4 trillion) in its defined contribution pension system, was the biggest mover with an overall country score uplift of 19 points in five years. 

Since the GPTB began publishing individual fund scores in 2022, when Canada’s CPP Investments topped the list with 81 out of 100, transparency standards have surged. In 2025, 18 funds (including CPP Investments) have exceeded that score.  

Norway’s $1.9 trillion Government Pension Fund Global, which scored just 75 in 2022, achieved a remarkable leap and earned a perfect 100 in both 2024 and 2025.  

The A$330 billion ($215 billion) Australian Retirement Trust, ranked ninth in 2025 with 92 points, was the biggest improver among all funds over the past four years. In 2022, QSuper – which later merged with SunSuper to form Australian Retirement Trust – scored just 49 points, but the consolidation has prompted the creation of more rigorous public reporting standards. 

Overall, 92 per cent of funds improved their transparency scores during the project’s lifespan, with the top 20 funds gaining an average of 19 points in four years. Among the laggards, 19 funds had a transparency score under 50 in 2025, compared to 27 in 2022.  

The numbers show clear progress, but the real stories emerge from individual funds. Through their own reflections, leading funds reveal the challenges they faced in improving transparency and the strategies that drove their gains. 

Life after the perfect score for NBIM 

Looking across the benchmark’s top performers, CEM Benchmarking researchers observed real change within an organisation comes from the internal leadership team, rather than from external forces such as regulators. 

This is exemplified in the $2 trillion Government Pension Fund Global, where CEO of its investment management company Norges Bank Investment Management Nicolai Tangen spearheaded the transparency initiative internally – similar to his role in the fund’s radical adoption of artificial intelligence.  

In 2022, the first year of individual fund scores, the fund ranked fourth in cost, 33rd in governance, eighth in performance, and ninth in responsible investing and in 2025, all of those scores are a perfect 100 for the second year in a row.  

“As an investor, the right kind of transparency strengthens our dialogue with the 8,500 companies in our portfolio,” NBIM chief communications and external relations officer Marthe Skaar tells Top1000funds.com. 

“The Global Pension Transparency Benchmark has pushed us and our peers to be more deliberate about what we disclose. When done well, collective transparency can drive better practices across the industry.” 

Lessons from CPP Investments 

Canada as a nation has reigned for five straight years as the country with the highest score, as measured by the average score of the five largest pension funds. The five Canadian funds surveyed have consistently stayed among the top 15 ranked funds even though competition has ramped up over the years. The nation’s largest investor, the C$714 billion ($510 billion) CPP Investments, led the charge over the years.  

To have sound transparency practices, a fund’s public disclosures not only have to be available but also easily accessible. 

Beyond annual reports, CPP Investments structures its public disclosures around quarterly financial statements; policies and proxy voting reports; public meetings with beneficiaries around Canada; digital access and its website and social platforms; and executive communications via speeches and interviews.  

“Transparency is how we serve Canadians and how we compete globally – a cultural advantage that deepens trust, strengthens partnerships, and attracts talent,” CPP Investments senior managing director and global head of public affairs and communications, Michel Leduc, tells Top1000funds.com.  

A healthy dose of peer competition has also pushed funds collectively to pursue excellence. “Retirement systems endure only when the public trusts them. We want the sector as a whole to perform well. One bad performer hurts the sector, which hurts all of us,” Leduc says of the dynamic.  

“Leaning heavily into transparency to earn public trust and confidence means welcoming and being comfortable with ‘holding our feet to the fire’ as energy to perform at the highest level.  

“That is good to inspire a healthy competitive spirit and hard work. That’s palpable across all our offices worldwide.” 

In factor rankings, Canadian funds had the best practices in responsible investing, governance and performance reporting but were beaten by the Netherlands in transparency of cost disclosures. 

Leduc acknowledges there is always room for improvement within the fund. It aims to run ahead of stakeholder expectations but not improving “for the sake of it”.  

“It’s never just about more information. Not all information is useful. It is about the right information. This is the distinction I frequently make between disclosure and transparency,” he says.  

“The latter implies something more sophisticated. It is goal-oriented, including whether it leaves the stakeholder better informed and therefore more likely to support the strategy. They become promoters.” 

NBIM’s Skaar echoed CPP Investments’ sentiment that more information may not lead to more transparency. The fund believes that having good transparency means being accountable to stakeholders while protecting intellectual property related to investments. 

“Transparency is a moving target, and we need to be thoughtful about that. What stakeholders need to know evolves, and so must our approach,” she says.  

“The challenge isn’t just doing more – it’s ensuring that what we share actually serves accountability and understanding, without creating noise or exposing information that could harm the fund’s ability to deliver returns.”  

Global asset owners have made significant advancements in the transparency of disclosures with the industry, showing unprecedented alignment with best practices in performance, responsible investing and governance disclosures.

However, transparency of cost disclosures continues to be a pain point, according to the 2025 Global Pension Transparency Benchmark.

A joint initiative between Top1000funds.com and CEM Benchmarking, the 2025 edition of the GPTB marks the final instalment of a five-year project which was established to showcase best practice in the industry and provide a self-improvement framework for fiduciary investors.

Each fund and country analysed is given an overall transparency score out of 100, which is informed by their reporting practices across four dimensions: cost, governance, performance and responsible investing.

This year’s results are a clear indication of the steps that global pension funds have taken to enhance trust and improve reporting practices. In 2025, the average transparency score for funds is 65, compared to 63 last year and 60 in 2023.

More funds continued to enhance the quality of their public reporting, with 61 per cent lifting their scores – slightly lower than the 72 per cent that did so last year.

Responsible investing disclosures continue to be the area with the most measurable change, with the average country score of 71 in 2025, which represents a significant jump from 47 in the first edition of the GPTB in 2021.

Eight funds received a perfect score in at least one factor, with Norway’s Government Pension Fund Global scoring 100 in all four and taking the top spot in the fund rankings for the third year in a row.

The average country score of the performance factor rose to 66 (from 64 last year), while the average governance score edged up to 75 (from 74 in 2024).

But funds have failed to make inroads on cost reporting. Over the five years of the GPTB project, the average country score actually regressed from 51 in 2021 to 49 in 2025.

Cost

Pension funds were scored on cost across 28 questions in three aspects common to all, including annual and financial report disclosures, asset class disclosures and the completeness of external management fees, and one aspect focused on member service.

Year on year, the average country score on the cost factor did not see any improvements (49 points). There is also a great dispersion of results with individual fund scores ranging from 11 to 100.

The Netherlands continues to demonstrate best-in-class cost reporting with the highest score of 90, while Denmark and Switzerland are the two countries among the top 10 whose rankings improved.

The benchmark notes that there are barriers to comparability in reviewing costs across the globe, due to differences in tax treatment, organisation/plan types, and accounting and regulatory standards. The review is focused on the material areas common to most funds.

Governance

Organisations were evaluated across 35 questions across four components in governance, which included the disclosure of governance structure and mission, board qualification, compensation and team structure, and organisational strategy.

Three of the six funds that achieved a perfect score in this category are Canadian investors. Canada is also the country with the highest governance reporting score of 99.

Norway was the only country among the top 10 overall with improved rankings in governance.

The benchmark report notes that governance scores were most closely correlated with the overall score and proposes that as good governance produces positive results, it creates greater incentives to be transparent with stakeholders.

Governance also has a demonstrated relationship with responsible investing, as the report notes that good governance could prompt funds to move beyond purely managing assets and towards creating social and environmental benefits.

Performance

Performance scores were based upon 44 questions across seven components that were common to all funds, and two (member services and funded status) that were only applicable for some asset owners.

The benchmark report notes that components were re-weighted to accommodate what was not applicable, so that each individual fund was scored out of 100.

Canada again claimed the top spot in performance reporting disclosures with a country average score of 92, followed by the US and Australia. South Africa was the only nation in the top 10 to lift its ranking, improving from a score of 61 in 2024 to 66 in 2025.

The report notes that disclosures of the current year and at the total fund or investment option level are generally comprehensive, however reporting on longer time periods and asset class results tends to be minimal or missing. Some funds disclose intermediate (for example, three to seven years) performance figures.

Responsible investing

Assessment around responsible investing is the most comprehensive with 47 questions across three major components. The average country score was 71 in 2025, up from 67 in 2024 and 47 five years ago. The massive uplift is a sign that the responsible investing trend remained resilient despite headwinds facing ESG.

Canada retained the top spot in the factor ranking with an average score of 96.

Although sitting outside the top 10 leader board, three Latin American nations – Mexico, Chile and Brazil – improved their rankings, all with a score uplift of more than five points.

The Nordic countries – Sweden, Denmark, Finland, and Norway – continued to hold high standards as a region with responsible investment reporting, with all countries scoring higher than the factor average.

The benchmark report highlights that responsible investing continues to have the greatest dispersion of scores, reflecting that countries are at different stages of implementing responsible investing within their investing framework. Average country scores ranged from 0 to 100.

Over the years, CEM Benchmarking product manager Edsart Heuberger says the GPTB benefited from valuable input from funds that were measured, allowing it to evolve. Of the top 10 transparency leaders, eight engaged closely with the project, filling in measurement gaps of the research and asking for examples of best practices.

The real force that will drive change within an organisation almost always comes from the internal leadership team, rather than from external forces such as regulators, he says.

“My tip is this is a framework that is robust, remains relevant… if funds haven’t made the improvements, the roadmap is still in the public domain.

“The goal was to take public reporting to a much higher level, and given all those stats, I think we’ve accomplished that.”

Norway’s $2 trillion Government Pension Fund Global has retained its title as the world’s most transparent fund, scoring a perfect 100 out of 100 for the second year in a row, according to the results of this year’s Global Pension Transparency Benchmark.

A joint initiative between Top1000funds.com and CEM Benchmarking, the 2025 edition of the GPTB marks the final instalment of this five-year project, which was established to showcase best practice in the industry and provide a self-improvement framework for fiduciary investors.

The full assessment consists of 155 questions determining funds’ levels of transparency across the disclosures of cost, governance, performance and responsible investing. A total of 11,625 data points from 75 funds were analysed by the CEM Benchmarking research team in 2025.

The Government Pension Fund received a perfect score in 2025 and 2024, a notable improvement from an overall transparency score of just 75 in 2022. The fund’s prioritisation of transparency has come from the top with CEO Nicolai Tangen telling Top1000funds.com in 2023 that transparency is integral to the fund’s ambition of becoming “the world’s leading fund, full stop”.

CPP Investments was in second place in 2025, with a score of 97 points and Quebec’s CDPQ displaced CalPERS in third place.

This year has proven to be particularly competitive with four funds tied in fourth with the same transparency score: AustralianSuper, BCI, Norway Domestic Fund and CalPERS.

The A$330 billion ($215 billion) Australian Retirement Trust ranked ninth with 92 points and was the biggest improvement among all funds over the past four years. In 2022, QSuper – which later merged with SunSuper to form Australian Retirement Trust – scored just 49 points, but the consolidation has prompted the creation of more rigorous public reporting standards.

CEM Benchmarking product manager Edsart Heuberger reflects that scale, mandates and types of investment holdings are all factors that drive a fund’s transparency ranking. For example, it is more difficult for Canadian funds to achieve a perfect score with their massive private asset books than the Government Pension Fund, which only invests in listed markets, he says.

There are also external factors like regulation which dictate the types of disclosures funds need to make as a minimum requirement.

Heuberger says there is a unique dynamic in benchmarking transparency compared to, for example, benchmarking fees or performance.

“What you typically see [in any kind of benchmarking] is that the leaders set a bar, and everyone else follows and gets closer, whereas this benchmark, it was very obvious from the beginning, and the leaders were making the greatest improvements – the laggers were not,” he says.

2025 improvements

That said, 2025 marked the first time an equal number of funds improved their scores in the top and bottom halves of the ranking, showing that public scrutiny continues to translate into industry practice alignment.

Across all funds, 61 per cent improved their score (compared to 72 per cent last year) and 15 per cent had worse scores.

In 2025, 19 of the top 20 funds maintained or improved their scores from last year. Sweden’s AP4 was the only fund to slip – down one point and five places – highlighting again the fierce competition among leading funds.

As the project comes to an end, Heuberger encourages funds to keep using the GPTB framework for improving and maintaining a transparent organisation for stakeholders.

“For the top 10 funds, there is a next echelon of transparency with smaller improvements … but I think there is an upper limit to this,” says Heuberger.

“A tip for everyone is to just look at the best disclosures in the world, because what some leading funds do is very inspirational for other funds and something to look up to.”

Canada has been named the country with the most transparent pension funds for the fifth consecutive year, according to the 2025 Global Pension Transparency Benchmark, with each of the five Canadian funds assessed ranked in the top 15 funds globally.

The results reaffirmed the strengths of the Canadian model, known for its sound governance, clear investment mandates and well-run in-house capabilities. The Canada country ranking was eight points ahead of the two countries in second place, Australia and the Netherlands, which had an overall transparency score of 92.

The GPTB assesses the largest five funds in 15 countries and in Canada that was CPP Investments, CDPQ, BCI, OTPP and PSP. The overall transparency score is based on the measure of four factors – three of which Canada led the way. It displayed the best-in-class governance, performance and responsible investing disclosure practices, but lost out to the Netherlands in cost disclosures.

In large part the leadership displayed by Dutch pension funds in cost reporting is due to regulation. Dutch funds are legally required to report on their costs under a prescribed method – through the Financial Assessment Framework – to the regulator De Nederlandsche Bank.

CEM Benchmarking product manager Edsart Heuberger, who is research lead for the GPTB, says Canada’s leadership position is partly driven by a healthy dose of peer competition.

“With a region like Canada, there’s always been a bit of an effect of thinking ‘what’s CPP doing? If CPP is doing it, we better do too’,” he says.

“The Maple 8 funds pride themselves on great governance and great transparency. They’re all big. They’re all wanting to be leaders and competitive with one another. They want to say this is who we are, and this is what we have to be – that’s why I think they’re leaders in all but one category in the four factors.”

Europe showed strength in transparency as a region, with half of the top 10 most transparent countries belonging to the continent.

Heuberger notes that some nations don’t have a prevailing culture of transparency which is manifested in the ranking, such as Latin America and Japan (despite its massive pension assets).

“In countries like Mexico and Chile, which are the two Latin American countries in our benchmark, and to a lesser extent Brazil, we just don’t see a lot of progress,” he says. “Even though this [transparency benchmark] has been in the public domain for five years, there hasn’t been much impetus for change, that we’ve heard or seen.”

“Likewise, some of the Japanese pension funds didn’t seem to have lot of movement. Maybe that’s just reflective of that [reserved] Japanese business culture,” he says, noting that the $1.9 trillion Government Pension Investment Fund (GPIF) only ranked 32 in the overall benchmark.

“Another aspect is there are some highly regulated markets … like Australia and the Netherlands, and the UK, and you do see those markets do well.”

A joint initiative between Top1000funds.com and CEM Benchmarking, the 2025 edition of the GPTB marks the final instalment of a five-year project which was established to showcase and encourage best practice in the industry and provide a self-improvement framework for fiduciary investors.

Among all 75 funds assessed, 61 per cent improved their score (compared to 72 per cent last year) and 15 per cent had worse scores.

All 15 countries represented in 2025 fared better than five years ago when the GPTB released its first edition. The countries that have improved transparency the most over the five-year period are Australia (20 points), Canada (18 points) and the United States (16 points).

The UK’s £45.3 billion defined contribution pension scheme NEST is conducting a strategic review of its private markets allocation, in a bid to ensure it is still well-positioned in the market since it launched the program back in 2020 to capture a liquidity premium for its young member base.

The analysis by the investor’s eight-person private markets team includes assessing if there are more rigorous ways of identifying opportunities and is a chance to add managers if more strategies are needed for the fully outsourced allocation. The process also includes reviewing all managers to ensure that if the team were putting money out today they would select the same partner, explains Rachel Farrell, director of public and private markets in conversation with Top1000funds.com.

She reflects that one of the biggest challenges for private market investors involves maintaining re-investment and holding onto a deliberate pacing model that is challenged by the rolling maturation of assets as they realise. Something that is made more complicated for NEST by some £500 million ($645 million) of contributions pouring in every month,

“It requires constantly putting more money to work to maintain the allocation,” she says.

NEST’s journey into private markets began by developing some of the first evergreen structures with asset managers to specifically facilitate re-investment. These products have an indefinite life span that supports continuous capital raising, but were uncommon in private markets at that time NEST began building out its allocation, she says.

“The UK market was unused to evergreen structures at the time NEST began investing in private markets, but managers realised the benefits of not having to raise capital all the time. It’s a cost saving that is now accrued to the LP,” she says.

Evergreen structures (and close manager partnerships) also allow the team to constantly monitor deployment, she continues. In closed end structures managers raise the capital, investors commit over a 3-5 year cycle, and although there is communication between the two, the lack of transparency can be a source of investor frustration. In evergreen vehicles, NEST can see its money being put to work and see their investment pipeline.

“In many cases, NEST was the first evergreen fund the manager had done so the structures were really designed in consultation with us.”

NEST began investing in private assets with an inaugural allocation to private credit. That has now grown to include infrastructure, renewables, private equity and real estate and “as long as opportunities continue to present themselves” the pension fund aims to increase its 20 per cent allocation to privates to 30 per cent by 2030.

The team is close to funding a new US direct lending mandate and is also looking at opportunities in value-add infrastructure that marks a departure from the predominantly core allocation. NEST also added a second timber manager in August 2025.

Farrell believes scale also contributes to success. Researching private markets requires resources to monitor and select managers, and NEST’s scale also gives it more negotiating power with managers.

“Scale contributes to success in private markets, and the government’s initiative to create larger pools of capital makes a lot of sense. Financial services benefit from efficiencies of scale, and this is true of DC too,” she says, referencing the government’s Pension Schemes Bill which aims to consolidate smaller DC and DB schemes into fewer, better governed and more scalable entities.

NEST has styled its manager relationships around allocating large amounts to particular partners. It means that in many ways the pension fund has grown with its managers, and the relationships are strategic on both sides. Still, NEST took strategic partnerships one step further when it bought a stake in IFM Investors last year, joining a collective of 15 Australian pension funds.

“Our ownership stake in IFM means we treat each other as part of the same organization – it’s like being inside of the business.”

Close manager relationships also support better terms.

Farrell looks carefully at the trade-off between its large mandates and its own name in the market and wouldn’t work with a manager not willing to offer products at a fee the team feel is justified. Nor does NEST pay performance fees.

“We don’t believe that is necessary,” she says. There is no performance compensation within its own organization, and she says culturally NEST remains unconvinced by the idea that performance pay makes people work harder. Instead, the investor nurtures an ethos characterised by a belief that “people come in and do the best they can because they care about our members and want to do the right thing.”

NEST operates in a target date fund structure whereby members are invested in diversified funds that target their retirement. NEST’s investment structures and strategies have evolved in line with the Australian model

Another component of strategy is governance, of which ensuring managers have an appropriate valuation process as the value of assets grows in the portfolio, is key.

Because it’s a DC plan NEST prices a daily NAV, yet because private markets don’t price daily the team must ensure they are comfortable with the price they are holding assets, she explains. Governance around the valuation process includes ensuring each manager values and refreshes the portfolio and knows NEST will intervene if the valuation is suddenly out of wack because of infrequent valuation.

For example, private markets typically lag the public markets correction trajectory.

“During the pandemic, the correction in private equity lagged behind public equity. Had we been invested in private equity at this time, this would have been an obvious point of intervention. Public markets corrected more quickly than privates, and we would have needed a process with our managers to consider applying a discount, for example,” she says.

Good governance also includes ensuring manager stability. Managers are monitored on a quarterly basis to makes sure the team hasn’t changed in any way that could impact the strategy they manage on NEST’s behalf, particularly given the high level of M&A in fund management means teams often shift

Investing in private markets has also enabled NEST to integrate responsible investment. As direct owners, private markets give investors the ability to be a more active and influential owner; help managers focus on responsible investment and ESG, and have important conversations with companies.

Admittedly, equity owners can wield more influence than debt providers but she concludes that private debt investors can play an important role in encouraging corporate reporting.