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UK master trust NEST awards diversified private credit mandate

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NEST has appointed BNP Paribas Asset Management to run a portfolio of diversified private credit assets.

The French asset manager has designed an open-ended fund structure to offer exposure to a range of sub-sectors of the illiquid, unlisted credit market, according to an announcement today.

Mark Fawcett, chief investment officer at NEST, said the new fund would sit within the £8bn (€9.3bn) master trust’s overall allocation to private credit alongside infrastructure debt manager BlackRock and real estate debt manager Amundi. The scheme aims to have an initial allocation of around 5-7% to private credit after a ramp-up phase next year, with allocations to the three managers managed on a deal-flow driven basis.

In a statement announcing the new allocation, Fawcett said the move was “an important step in developing our investment strategy and helping to deliver the strong risk-adjusted returns we want for our members”.

“In a very competitive tender process BNP Paribas Asset Management’s expertise, commitment to ESG and innovation really stood out and caught our attention,” he said. “They’ve found a way in which we can confidently allow our members to benefit from the lower volatility and enhanced returns private markets can offer.”

Addressing the Pensions and Lifetime Savings Association’s annual conference in Manchester this morning, Fawcett highlighted NEST’s asset growth trajectory as a principle reason the fund could access illiquid asset classes. The master trust is expected to reach £20bn by 2022.

Mark Fawcett of NEST

Mark Fawcett, NEST CEO

Julien Halfon, head of pension solutions at BNP Paribas AM, added that the “innovation” shown by NEST regarding its private market investments showed other defined contribution funds it was possible to allocate to illiquid assets.

“NEST did it – now it is time for others to wake up and realise this is possible,” Halfon said.

Initial investments under the new mandate are to target European and US mid-market loans and loans to UK small and medium-sized enterprises, as well as infrastructure and commercial real estate debt.

US loans will be sourced through the asset manager’s banking parent, while the management of the portfolio will be a collaboration between BNP Paribas AM’s “multi-asset, quantitative and solutions” team and its private debt and real assets team.

NEST said it anticipated to commit around £500m across its three private credit mandates over the next 12 months but “will not force money into the market”. 

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