The £240m (E367.3m) pension fund of UK private health care insurer Bupa has awarded an £18m (E27.5m) high-yield bond mandate to Muzinich & Co, with the high-yield specialist saying there is an ‘explosion’ in the asset class.
Bupa’s move is part of an asset-class review at the fund coordinated by investment consultant’s Watson Wyatt’s Nick Horsfall.
“The trustees, adopting recommendations contained in the Myners Report, and after taking advice from Watson Wyatt, have resolved that diversification into complementary asset classes, such as high yield bonds, will enhance the Bupa Pension Scheme’s returns within an appropriate asset allocation strategy,” says Arthur Walford, chairman of the trustees.
The bulk of the fund’s portfolio has been equities, with 82% of its assets divided roughly evenly between UK and overseas equities. Just 11.2% was invested in UK fixed income, with a further 2.8% invested in index-linked gilts.
“Bupa is our first UK pension fund client and we are delighted to have been awarded this very important piece of business,” says Francis Paxton, head of institutional marketing at Muzinich in London. He says the firm specialises in High-yield bonds.
He added that its assets under management rose by almost $500m in 2002, boosted by European investors. “We are witnessing an explosion in the asset class, and all the signs are that 2003 will see continued flows of new funds in high yield, as investors seek haven from equities.”
US-based Muzinich has around $3.4 bn in assets under management in high yield and investment grade bond mandates. It says on its website that it has “an analytically driven approach to the corporate bond market” and that “we are prudent investors looking for well-run companies at attractive valuations”.