Brunel Pension Partnership, the UK’s investment pool that oversees some £30bn (€35.3bn) on behalf of 10 local government pension funds, has launched a sterling corporate bond fund.
The new fund, which has assets worth £2.1bn, will be managed by Royal London Asset Management, the pool announced.
A Brunel spokesperson told IPE that six out of its 10 pension fund clients had invested in the new corporate bond fund.
The pool announced last year that the fund launch would be scheduled for Q1 2021 with assets worth £1.2bn.
“The fund is highly diversified, providing our clients with access to a range of holdings, as well as a range of maturities,” said David Cox, head of listed markets at Brunel.
“Our clients’ prioritisation of ESG considerations was also reflected in the fund’s design and manager selection process. The manager is contractually committed to providing evidence of ESG impacts of decisions taken in the fund, and of any broader contributions the fund is making to investing responsibly,” he added.
The vehicle can invest directly into a range of sterling-denominated bonds of UK and overseas public companies, international agencies, housing charities, private companies, and via securitised debt, Brunel said, adding that it can also invest across a range of maturities.
Brunel noted that eligible instruments include sovereign bonds, sub-sovereign bonds, corporate bonds, asset-backed securities, spot FC, FX forwards, government bond futures, interest rate futures and money market funds, as defined by inclusion in the Partnership’s benchmark – the iBoxx Sterling Non-Gilt All-Maturities Bond index.
The fund, it said, has been designed to gain exposure to sterling bond markets and credit risk premium, with additional returns from manager skill.
Stephanie Carter, portfolio manager on the sterling corporate bond fund at Brunel, said she was “impressed by Royal London’s long-term approach and comprehensive due diligence”.
She added: “Royal London has a highly diversified portfolio and a team-based approach, which gave us confidence that a single-manager solution met our clients’ aims.”
Brunel said it received 26 tenders, from which it ultimately chose five potential managers for further due diligence.
The pool engaged Mercer and David Saab, Brunel’s independent fixed income consultant, during the selection process.