France’s civil service pension scheme has awarded a €160m emerging market corporate bond mandate to Aberdeen Asset Management as it seeks to increase its exposure to the asset class through segregated mandates.
ERAFP also awarded standby mandates to Amundi and BFT Investment Managers, completing a procurement process that was launched in April last year. If BFT’s mandate were to be activated, the financial management would be delegated to Investec Asset Management, a spokeswoman said.
The €29.5bn pension fund has invested in emerging market corporate bonds since 2016 through mutual funds.
It said increasing its exposure to the asset class through segregated mandates would allow specific investment guidelines to be applied, in particular with respect to its socially responsible investment (SRI) approach.
“In a universe that financial and non-financial analysts generally cover less well than developed markets, ERAFP deemed it appropriate to encourage portfolio management processes based on an in-depth analysis of issuers’ fundamentals in order to capitalise on market inefficiencies,” it said in a statement.
The SRI approach would involve integrating environmental, social and corporate governance (ESG) criteria into the fundamental analysis, the pension fund said, relying on continuous dialogue with portfolio companies to generate ratings of all issuers in accordance with the pension scheme’s ESG criteria. A mechanism for identifying, evaluating and monitoring controversial practices would be formally established.
The pension fund has instructed managers to run a portfolio of non-benchmarked conviction holdings, and said it would not be setting a specific tracking error limit.
As at the end of December, ERAFP had 56% of its portfolio in bonds, 30% in equities, and 9% in real estate. The rest was in unlisted assets, and liquidity and diversification pockets. Regulatory constrains mean it has to invest at least 50% in bonds, and no more than 12.5% in real estate and 40% in diversifying assets.
ERAFP received the award for best emerging markets strategy at IPE’s 2018 Awards in Dublin in December.