implementation document End of September to end of December 2016 All of NEST s funds are delivered by our expert in-house team blending building block funds managed by professional external fund managers. The implementation document (IID) provides information on how this works in practice. Table 1 shows the underlying building block funds used to implement the investment strategy of NEST s fund range. It also shows the total exposure of all NEST funds to each underlying fund as a percentage of all the money managed by NEST. Table 2 show shows the selection of building block funds used to deliver each of the NEST funds and the resulting asset allocations. Figure 1 shows the asset allocation for each single year target date fund in the default range of NEST Retirement Date Funds. This information is updated quarterly. The IID is a companion document to NEST s Quarterly investment report and Statement of investment principles (SIP). You may also find it helpful to read this document in conjunction with Looking after members money. You can find all these documents at nestpensions.org.uk
Page 2 implementation document end of September to end of December 2016 Table 1: Exposure to building block funds and asset classes class Fund manager Date appointed approach Benchmark Fund name Exposure to asset class* Global developed equities UBS Passive FTSE All World Developed Index UBS Life World Equity Tracker Fund 43% UK gilts State Street Global Advisors Passive FTSE Actuaries All Stocks Index SSgA UK Conventional Gilts All Stocks Index Fund 0.9% UK index-linked gilts State Street Global Advisors Passive FTSE Actuaries Index Linked Gilts over 5 years Index SSgA UK Index Linked Gilts over 5 Years Index Fund 0.9% Low-risk sterling liquidity BlackRock Active Seven-day LIBID BlackRock Aquila Connect Cash Fund 8.1% Short Duration Grade Credit BlackRock December 2016 Active GBP 3 Month LIBID Blackrock Institutional Sterling Ultra Short Bond Fund 2.7% Short Duration Grade Credit Royal London December 2016 Active ML 1-5 year Sterling Non-Gilt All Stocks Royal London Grade Short Dated Credit 4.6% Global ethical equities BMO Global ** April Active MSCI World Index F&C Responsible Global Equity Fund 0.1% Sharia compliant equities HSBC Global April Passive Dow Jones Islamic Titans 100 HSBC Amanah Global Equity Index Fund 0.1% Sterling corporate bonds Royal London April 2012 Active iboxx Sterling Non-Gilt All Maturities Index Royal London UK Corporate Bond Pooled Pension Fund 14% UK direct property Legal & General July 2013 Active REF/IPD UK Quarterly Property All Balanced Funds Index LGIM Managed Property Fund 0.4% Hybrid property (UK direct property and global listed property) Legal & General July 2013 Active FTSE EPRA/NAREIT Global REITS/REF/ IPD UK Quarterly Property All Balanced Funds Index LGIM Hybrid Property Fund (70% UK direct property, 30% Global listed property) 11.9% Global property LGIM March 2016 Passive FTSE EPRA/NAREIT Global Developed Real Estate Index Global Real Estate Equity 3.1% Ethical corporate bonds BMO Global ** April 2014 Active iboxx Sterling Non- Gilt All Maturities Index F&C Responsible Sterling Bond Fund 0.04% Emerging markets (alternative indices) HSBC Global June 2014 Passive HSBC Economic Scale Emerging Markets Index HSBC GIF Economic Scale Index Emerging Markets Equity Fund 1.4%
Page 3 implementation document end of September to end of December 2016 class Fund manager Date appointed approach Benchmark Fund name Exposure to asset class* Emerging markets (alternative indices) Northern Trust July 2014 Passive MSCI Emerging Markets Custom ESG Index Northern Trust Emerging Markets Custom ESG Equity Index Fund 1.5 % Emerging market debt Amundi March 2016 Active 50% JPM EMBI Global Diversified Hedged Euro/50% JP Morgan ELMI Plus Amundi Funds Global Emerging Blended - IE 5.1% Short-dated gilts Legal & General April 2015 Buy and hold N/A LGIM Single Year Gilt Funds 2.3% *Figures may be affected by rounding. **Please note that F&C funds are distributed by BMO Global
Page 4 implementation document end of September to end of December 2016 Table 2: NEST Retirement Date Funds allocations to building block funds NEST fund NEST fund phase class building blocks Target asset allocation* NEST Retirement Date Funds NEST Starter Fund Foundation phase Growth phase Consolidation phase NEST Post Retirement Fund 1. Global developed equities 2. UK gilts 3. UK index-linked gilts 4. Low-risk liquidity 5. Short-dated gilts 6. Sterling corporate bonds 7. UK direct/global listed property 8. Emerging market equities (alternative indices) 9. Emerging market debt Each NEST Retirement Date Fund follows a glide path with a varying asset allocation each year. The Starter Fund is for members who join NEST before they are eligible for auto enrolment. The Post Retirement fund is for members who join NEST after their State Pension Age or who haven t taken their money out of NEST in the year they were expected to. NEST Retirement Date Funds that have matured will be closed down and any money remaining in them will be moved over to the NEST Post Retirement Fund. The glide path allocation is managed dynamically and factors in market conditions that contribute to delivering the investment objectives. Please see Figure 1 for a breakdown of the asset allocation of each NEST Retirement Date Fund. NEST Ethical Fund This fund is automatically lifestyled across three phases. The asset allocation of each phase can be found in the last column. Switching from foundation phase to growth phase is linear and occurs automatically over five years. Switching from growth phase to consolidation phase is linear and occurs over 10 years. Foundation phase 1. Global ethical equities 2. Ethical corporate bonds 3. UK gilts 4. UK index-linked gilts 5. UK direct property 6. Short-dated gilts 1. Global ethical equities 43.8% 2. UK direct property - 11.8% 3. UK gilts 1.8% 4. UK index-linked gilts 1.8% 5. Ethical corporate bonds - 28.6% 6. Short-dated gilts 12.2% Growth phase 1. Global ethical equities 59.6% 2. UK direct property 16% 3. UK gilts - 1% 4. UK index-linked gilts - 1% 5. Ethical corporate bonds - 15.7% 6. Short-dated gilts 6.7% Consolidation phase 1. UK gilts - 37.5% 2. Ethical corporate bonds - 37.5% 3. Short-dated gilts - 25% NEST Sharia Fund 1. Sharia compliant equities 1. Sharia compliant equities 100% NEST Higher Risk Fund Members invested in the Higher Risk Fund are wholly switched into the appropriate Retirement Date Fund when they are 10 years from their expected year of retirement, unless they change their retirement date to a later year. Growth phase 1. Global developed equities 2. UK direct/global listed property 3. Emerging market equities (alternative and ESG indices) 4. Emerging market debt 1. Global developed equities - 67% 2. UK direct/global listed property - 18% 3. Emerging market equities (alternative indices) - 7% 4. Emerging market debt 8%
Page 5 implementation document end of September to end of December 2016 NEST fund NEST fund phase class building blocks Target asset allocation* NEST Lower Growth Fund 1. Low-risk liquidity 1. Low risk liquidity 100% NEST Pre-retirement fund 1. UK gilts 2. Sterling corporate bonds 3. Low-risk liquidity 1. UK gilts - 37.5% 2. Sterling corporate bonds - 37.5% 3. Low-risk liquidity - 25% Figure 1: allocation for each single year NEST Retirement Date Fund
Page 6 implementation document end of September to end of December 2016 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% NEST Retirement Date Fund Emerging Market Equities Developed Market Equities Emerging Market Debt Sterling Corporate Bonds Property Index Linked Gilts All Stock Gilts Short Duration Gilts Liquidity NEST Corporation 2017. All rights reserved. Any form of reproduction of all or any part of this document is not allowed. We do not make any personal recommendation or give advice on how to make decisions concerning investment or taxation. The information in this document does not constitute financial, investment or professional advice or a personal recommendation and should not be relied on. No undertaking is given, or representation or warranty is made, express or implied, by NEST that the material in this document is current, accurate, complete or error free, and the material must not be relied upon as such. NEST does not accept responsibility for any loss caused to any recipient of this document as a result of any error, inaccuracy or incompleteness of the document. The NEST trade marks and trade names used above are owned by NEST Corporation and should not be used in any way without our permission. p50204v1 10268-2 03/17