The UK’s largest local authority pension fund has appointed Stone Harbor Investment Partners to run a £1bn (€1.1bn) multi-asset credit mandate.

It is the £23bn Greater Manchester Pension Fund’s (GMPF) first dedicated allocation to credit, according to a press release from Stone Harbor.

The mandate aims to outperform Libor by 4%-6% a year over a market cycle, the New York-based asset manager said.

The strategy includes investments in global sovereign debt, investment grade corporate debt, securitised debt, high yield, and emerging markets sovereign and corporate debt.

Councillor Gerald Cooney, vice-deputy chair of GMPF, said the new mandate was meant to generate “broadly equity-like returns with lower volatility”. 

David Scott, portfolio manager at Stone Harbor, added: “We focus on higher-yielding public markets, allowing an active allocation decision to combine with a bottom-up security selection process.

“Our multi-asset credit strategy is currently adopting a somewhat conservative stance overall given valuations, with a bias towards the sovereign cycle over the corporate cycle.”

GMPF first launched a framework for multi-asset credit in 2016, shortlisting Stone Harbor alongside KKR and Oak Hill Advisors, but did not make an allocation.

GMPF is working with the Merseyside and West Yorkshire local government pension schemes (LGPS) to build the Northern pool, as part of the LGPS’ investment collaboration drive.

The fund also partnered with the London Pensions Fund Authority in 2015 to launch an infrastructure investing vehicle, which now also includes the Lancashire County Pension Fund, West Yorkshire and Merseyside.

See also: November’s Credit Special Report