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NEST tenders standalone emerging market bond mandate

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The UK’s National Employment Savings Trust (NEST) is tendering for an emerging market bond manager to further diversify its default fund.

The defined contribution (DC) master trust’s CIO Mark Fawcett said emerging market bonds were increasingly finding a place within pension portfolios as they offered “attractive” yields in the prevailing low-yield environment.

“We think it’s appropriate to have emerging market debt among the growing number of asset classes NEST can call on to deliver better retirement outcomes for our members,” he added.

The actively managed portfolio would be allowed to seek exposure to both hard and local currency debt, and a spokesman for NEST told IPE it did not have preference for sovereign or corporate bonds, instead preferring to see what asset managers submitted.

The mandate would initially form part of a pooled fund, but in its tender the fund said that it might transition to a segregated mandate at a later point.

Fawcett added: “An active management approach can take advantage of opportunities while managing the portfolio risk by avoiding unattractive or risky borrowers.

“By having an investment universe of both hard and local currency debt, the manager will have the ability to invest in the most attractive areas of the market.”

The tender comes two years after NEST sought managers for a “relatively cautious” emerging market equity mandate, to which it eventually appointed Northern Trust Asset Management and HSBC Global Asset Management.

Fawcett has previously told IPE the fund would be shifting from multi-asset mandates to single-asset mandates as it grows in size, as the change will allow it to exert greater control over asset allocation.

It has seen its assets grow to £535m (€728m), up from £104m in April 2014.

Interested managers have until 14 October to participate.

Read about how NEST views smart beta in IPE’s September issue

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