Nest has announced plans to invest more than £3bn in infrastructure by the end of the decade, increasing its portfolio allocation to at least 5 per cent.

The pension scheme said that it believed direct infrastructure equity investments could offer diversification benefits and a return premium to public market equities, with lower risk.

To help meet its investment target, Nest has appointed CBRE Caledon Capital Management, the private infrastructure investment arm of CBRE Global Investors, and GLIL Infrastructure.

CBRE Caledon has been tasked with helping Nest invest in global core and core-plus infrastructure projects directly, and will provide Nest with access to an infrastructure fund sponsored by the firm.

GLIL Infrastructure represents a joint venture between local authority pension schemes, with Nest planning to invest in the fund along with GLIL Infrastructure’s members.

Nest stated that the types of infrastructure it could invest in included fibre networks, social housing, water and waste treatment plants, and seaports.

Its initial commitment to these mandates will be £650m, with “significant” further commitments in subsequent years.

“Nest’s investment strategy is evolving at pace in line with the growth in our assets under management, opening up new assets classes in the pursuit of the best risk-adjusted returns for our members,” commented Nest head of private markets, Stephen O’Neill.

“We believe direct infrastructure equity investments can offer diversification benefits and a return premium to public market equities, at lower levels of risk.

“I’m therefore excited to announce these new partnerships. After a very competitive procurement, we’ve emerged with excellent fund managers that can deliver exactly what we were aiming for.”

GLIL Infrastructure COO, Ted Frith, added: “Infrastructure investment is absolutely critical to supporting the UK’s recovery and building a sustainable economy for the future, and pension funds like Nest can play a fundamental role in helping to fund those projects.

“This initial capital commitment has expanded our fund to £2.5bn. The increase in financial firepower enables us to target new opportunities, potentially expand our holdings in current investments, and scale up our investment ambition – all to the benefit of our investors and the pension members they serve across the country.

“GLIL investors share Nest’s long-term investment horizon and sustainable investment objectives, and look forward to building an enduring relationship with the team to bring the benefits of infrastructure investment to millions of workplace pension holders.”

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