UK - The pension scheme of domestic appliance maker Hoover has awarded its first international cross-over corporate bond mandate worth 18 million pounds (26.5 million euros) to Muzinich – resulting in a loss for Schroders.
As a result, Schroder Investment Management has lost its bond brief, although it retains a “substantial” equities mandate, explained pension fund manager Barry Hawkins.
Julian Samways, head of corporate communications at Schroders, declined to comment.
“It is a mature pension scheme, which has existed in one form or another since 1948,” Hawkins said, adding that the decision to award a bond mandate to a boutique followed an asset and liability strategy review.
Hawkins said the asset allocation consisted of a 60% exposure to bonds and 40% to equities. The 386 million-pound fund is managed by UBS Global Asset Management, which has equity and bond briefs, Schroders and Muzinich.
“With our bond allocation increasing over time we felt it worthwhile diversifying this by extracting value from other less traditional sources within the bonds markets,” said Alberto Bertali, chairman of the trust.
“Global high yields offers a long term attractive risk return potential and adds the element of diversification we were looking for.”
Bertali also said the fund, aided by Aon Consulting, had undertaken a “detailed search” of the bond market and found that Muzinich met its needs.
Francis Paxton, head of institutional marketing at Muzinich, said the firm would manage bonds rated from BBB+ to B-.
Paxton also explained that exposure to the BB and B range would immunise the fund from interest rate movements.
“Hoover is investing into the part of the investment grade sector which has the potential to offer the greatest return for unit of risk and combining this with the higher quality part of the high-yield universe,” he also said.
Muzinich said it manages over 230 million pounds for nine UK pension schemes.