AP1, Stockholm, hired Hermes Investment Management to run a $400 million global high-yield credit allocation.
Hermes is one of a number of money managers the 323 billion Swedish kronor ($39.8 billion) pension fund is adding under a broadened high-yield allocation, said Tina Ronnholm, portfolio manager, external management, in an email.
A news release on AP1's website said Hermes' credit investment process includes the assessment of environmental, social and governance risk to credit valuations, returns and society when analyzing issuers.
A search, launched in December, sought to broaden the fund's exposure to global high yield from U.S. high yield only. MacKay Shields and Shenkman Capital Management had managed the external U.S. high-yield exposure, and both managers remain on the approved list of high-yield managers, she added.
A notice on the fund's website said the following money managers, in addition to Hermes, MacKay Shields and Shenkman, have also been approved, but not yet funded, for high-yield credit allocations:
Brigade Capital Management, Capital Four Fondsmaeglerselskab, Legal & General Investment Management, M&G Investment Management, Morgan Stanley (MS) Investment Management, Neuberger Berman Group, Normura Corporate Research and Asset Management, TOBAM and Wellington Management International.
"The selected managers will give the fund good flexibility and portfolio diversification together with a high expected risk-adjusted return net of costs. The managers complement each other well in terms of investment styles, regional expertise as well as risk profiles and will thereby contribute to the diversification of the portfolio," the notice said. Funding decisions will be decided separately.