Britain’s largest workplace pension scheme, Nest, is moving its entire £3.5 billion ($4.6 billion) emerging-markets equity portfolio to US asset manager Wellington Management, ending more than a decade of passive investing as it seeks greater influence over companies and stronger control of sustainability risks.

The decision marks a notable shift for one of Britain’s largest institutional investors at a time when pension funds and other long-term asset owners are reassessing the balance between low-cost index investing and active management.

Nest, which manages £68 billion for more than 14 million workers automatically enrolled into its pension plans, had invested its emerging-markets allocation passively since 2014. The approach allowed the scheme to gain broad exposure at relatively low cost, but it also left Nest holding small positions in a very large number of companies.

That became a growing concern as Nest placed greater emphasis on shareholder engagement over issues including climate change, diversity, workers’ rights and corporate governance.

Nest moved from a conventional passive mandate with Northern Trust to the manager’s Climate Aware Emerging Markets Equity Strategy in 2021. But the portfolio still contained more than 1,000 stocks, making it difficult for the pension scheme to exert meaningful influence over individual companies.

The new Wellington mandate will concentrate the portfolio in roughly 100 to 150 stocks.

Rachel Farrell, Nest’s director of public and private markets, said the change would allow the pension scheme to devote more resources to understanding individual companies and using its position as a shareholder.

“A pure passive approach… just wasn’t engaged enough,” Farrell said. “We weren’t really spending time understanding each of the stocks that we would own in our members’ portfolios.”

“To influence as a shareholder, you need to be an important owner of that particular company,” she added.

The shift reveals a tension at the heart of passive investing for large institutional investors. Index strategies offer diversification, transparency, and low fees, but investors have limited flexibility to allocate more capital to companies where they believe engagement can produce meaningful change.

The issue is particularly relevant for Nest because emerging markets contain thousands of companies with widely varying standards of corporate governance, environmental practices and labor policies. A concentrated portfolio gives an active manager greater scope to select companies and engage directly with their management teams.

Nest’s decision followed an internal review that began in 2024. Farrell said the previous passive strategy had met its return objectives, suggesting the move was not prompted by a failure to generate investment returns. Instead, Nest is betting that active management can add value in a market where company information, governance standards and investor coverage vary substantially.

The Wellington portfolio will be benchmarked against the MSCI Emerging Markets index, with the US manager targeting an additional 100 basis points of annual outperformance.

“Emerging Markets is one of the markets that is somewhat less efficient,” Farrell said. “There is evidence that an active manager can add value.”

The mandate represents a significant win for Wellington, which manages about $1.3 trillion in assets globally, including $44 billion in emerging-market equities. It also comes as emerging-market equities have delivered a strong performance this year. The MSCI Emerging Markets index is up 22% year to date, compared with a 9% gain for the developed-market MSCI World index.

The recent performance has helped revive investor interest in emerging markets after years of weak flows. Asset manager Ashmore said in a February report that demand increased during the second half of 2025 following large outflows from emerging markets since 2021. It estimated total emerging-market equity assets at about $1.4 trillion.

Nest has about 5.2% of its assets allocated to emerging-market equities, with most of its public-equity exposure invested through a systematic developed-markets strategy.

The move also places Nest within a broader institutional shift toward more active approaches to emerging markets. People’s Pension, another major UK workplace pension provider, last year moved its index-tracking emerging-market equity allocation into a more active, quantitatively driven strategy.

The decisions suggest that some pension investors are becoming less willing to treat emerging-market equities simply as a low-cost basket of securities. Instead, they are looking at active ownership, corporate governance and company-specific risks as part of the investment process.

There is also a scale argument behind Nest’s decision. The pension scheme receives about £700 million in contributions each month and expects its assets to approach £100 billion by 2030. Its membership currently covers roughly a third of Britain’s working population and is expected to reach half by the end of the decade.

As the pool of retirement savings grows, even relatively small improvements in investment performance can have a material effect on members’ eventual pension outcomes. But active management also introduces higher costs and the risk that a manager fails to deliver its targeted excess return.

Nest did not disclose the cost of transferring the mandate or the fees Wellington will charge.

Therefore, the new arrangement places the focus on whether Wellington can justify the additional complexity of active management through sustained performance and meaningful shareholder engagement.

The move represents a broader evolution in how it manages members’ money for Nest. After more than a decade of using passive strategies to obtain inexpensive exposure to emerging markets, the pension scheme is now concentrating its holdings and giving its external manager greater discretion to identify companies where active ownership can potentially influence long-term value.

The decision does not amount to a rejection of passive investing across Nest’s portfolio. Rather, it shows how a large pension fund is applying different investment approaches to different markets as its assets grow and its responsibilities as a long-term shareholder become more significant.

Tencent has reportedly signed its largest overseas cloud leasing agreement with Oracle, securing access to about 100,000 advanced artificial intelligence chips through data centers in Southeast Asia as Chinese technology companies seek additional computing capacity outside the country.

The five-year agreement, reported by the Financial Times on Wednesday, citing people familiar with the matter, is estimated to be worth about $7 billion and would involve multiple Oracle data centers across Southeast Asia. Tencent is also expected to make an upfront payment of about 30%, according to the report.

If confirmed, the scale of the arrangement would highlight the extraordinary computing requirements emerging from China’s AI race, as Tencent and other major technology companies invest heavily in training and deploying more capable models.

More importantly, the reported structure illustrates how Chinese technology companies are seeking access to advanced AI computing capacity through infrastructure outside mainland China as U.S. restrictions limit the availability of leading AI processors inside China.

But Tencent’s reported decision to lease computing capacity in Southeast Asia rather than simply expand its domestic infrastructure points to a broader challenge facing China’s AI industry.

The United States has imposed export controls restricting China’s access to some of the most advanced AI chips, particularly processors from Nvidia and other U.S. suppliers. Beijing has responded by accelerating development of domestic alternatives, while Chinese companies have simultaneously sought other ways to obtain computing capacity.

A five-year Oracle agreement worth roughly $7 billion would mark a substantial commitment to overseas AI infrastructure. The reported 100,000 chips would give Tencent access to a large pool of advanced computing resources that are unavailable to it domestically.

The arrangement would also shift part of Tencent’s AI infrastructure footprint outside China.

This is considered a huge shift because, among other things, training large language models requires enormous amounts of computing power, while running AI products at scale also requires sustained access to inference capacity. As models become more capable and AI applications gain users, the computational burden increasingly extends beyond the initial training phase.

Tencent has been expanding its AI ambitions across consumer and enterprise products, increasing the need for both model-training infrastructure and computing capacity for commercial deployment.

The company recently released a preview version of a new AI image-generation model aimed at professional creators. The model supports text-to-image and image-to-image generation, adding to Tencent’s growing portfolio of AI applications.

The Economics of The Chip Squeeze

The reported deal also illustrates how export restrictions can change the economics of AI development.

For Chinese companies, access to cutting-edge processors is not simply a question of purchasing chips. Computing capacity can be obtained through cloud providers that operate data centers in jurisdictions where certain processors can legally be deployed.

Tencent would reportedly be leasing computing capacity from Oracle rather than importing the processors directly into China. The structure could allow the company to use advanced chips without those processors being physically deployed inside mainland China.

The reported arrangement thus underpins the growing importance of cloud infrastructure as an intermediary between semiconductor restrictions and AI development. It also reveals why Washington has increasingly focused not only on direct chip exports but on the possibility that restricted Chinese companies could obtain access to advanced computing remotely through overseas data centers.

For cloud providers, meanwhile, the surge in AI demand creates an enormous infrastructure opportunity. Oracle has been expanding its cloud capacity to serve AI developers and has signed large computing agreements with technology companies seeking access to scarce advanced processors.

Tencent’s reported commitment is expected to add another major customer to that trend.

China’s AI Race is Becoming An Infrastructure Race

The deal comes as Chinese technology companies compete to develop more capable AI models while Beijing encourages greater reliance on domestic technology.

China’s strategy is producing two parallel efforts.

One is the development of domestic processors and software ecosystems that can reduce reliance on Nvidia and other foreign suppliers. The other is securing access to advanced computing resources wherever they remain available.

Tencent is one of China’s largest technology companies and has substantial financial and engineering resources to devote to AI. Its willingness to reportedly commit billions of dollars to overseas cloud capacity underscores how valuable advanced computing has become.

The scale of the reported transaction also puts the economics of the AI boom into perspective. A $7 billion commitment over five years would amount to roughly $1.4 billion a year, before accounting for other infrastructure, energy, networking, personnel and model-development expenses.

That spending underlines why AI is becoming an increasingly capital-intensive business even for companies that already possess extensive cloud and data-center infrastructure.

Nevertheless, the investment is expected to provide Tencent with the computing capacity needed to accelerate model development and support large-scale deployment. For Oracle, a deal of this size would reinforce the importance of cloud infrastructure providers in the global AI supply chain.

But the reported agreement also underscores the limits of China’s current domestic chip ecosystem. If Tencent needs to secure tens of thousands of advanced processors through overseas infrastructure, it suggests that domestic alternatives have not yet fully eliminated the computing gap created by U.S. restrictions.

China’s technology industry is therefore pursuing two tracks simultaneously: developing its own AI hardware and software while finding ways to access global computing capacity. The Tencent-Oracle agreement, if confirmed, would be one of the clearest examples yet of how those two pressures are reshaping the geography of AI infrastructure.