Thank goodness for Nest’s Liz Fernando.She has offered an explanation of why private capital works better with scale.

This was not the message of  a “summit” of private capital big-wigs (reported below by the intrepid Corporate Adviser reporter Christopher Marchant).

His report starts with the views of private capital sales people and ends with someone who buys on behalf of 15m of us. I know who I trust more!

First the headline from a “private capital summit”.

Industry figures urge end to ‘cost is king’ culture at private capital summit

Now a report of what a seasoned buyer has to say

Liz Fernando, chief investment officer at Nest, pointed out that in its own approach the pension scheme does not pay out carried interest or performance fees.

“We’ve shown what you can do at scale. If you’ve got large sums of money to commit, you can afford to negotiate. You need your partners to step up and to recognize that when you’re deploying a £1bn fund, the economics are going to be very, very different to when you’re deploying a £20bn fund, and that needs to be recognized.”

Fernando also disclosed that Nest has currently got about 20 per cent in private markets today, above the pledges within the Mansion House Accord. Of this, Nest has approximately 5 per cent in private equity, and the rest of the allocation is more broadly spread across real estate, infrastructure, private credit, and a “small but growing” timber allocation.

Nest is anticipated to have £100 billion in assets by 2030.

There is a message to private capital, looking to insert their wares into small DC schemes using LTAFs. There are better ways to get exposure that have existed for decades – they’re call investment trusts and they are best bought through a stockbroker – if you know what you are doing

Master Trusts and other workplace pensions shouldn’t stitch members up to meet the needs of Private Equity/Credit packagers.

I admire smaller DC schemes like SEI’s Master Trust that are holding back from rushing in when they’re not ready. This is putting member’s first and vain-glory of complying/participating with the Mansion House accord .

The cost that members pay for these investments can be obscure and high. They need to be purchased by people who understand what they are buying. Private Credit and Equity, as America is finding out, are not for retail markets.