National Employment Savings Trust, London, is looking for an actively managed emerging markets debt fund to add to its existing set of strategies within its default and other fund options, said a spokesman for the defined contribution plan.
The £535 million ($839 million) plan is looking for a strategy that blends bonds denominated in both local currencies and hard currencies, predominantly U.S. dollars.
The strategy will be added into NEST’s asset allocation process as an investible asset class, the spokesman said in an e-mail. NEST tends to use cash flows to rebalance into allocations, rather than withdrawing from other investments.
The current strategy options for NEST participants comprises 47 target-date funds, which act as the default strategy, and five additional fund choices — the Higher Risk, Lower Growth, Ethical, Sharia and Preretirement funds. The global emerging markets debt fund will be added to this range of building blocks for the fund options.
A notice filed with European procurement website Tenders Electronic Daily said phase one of the search is for a pooled fund. There would then by the option to transition to a segregated allocation at a later stage, the notice said.
“Emerging market debt is becoming a strategic holding for a growing number of pension schemes,” said Mark Fawcett, chief investment officer at NEST, in a news release. “This is in part because emerging market bonds can offer attractive yields in an otherwise low-yielding fixed-income 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.”
An active management approach can take advantage of opportunities, but also manages 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,” Mr. Fawcett added.
Proposals are due Oct. 15, and NEST intends to award the contract early next year. Further information is available on NEST’s website.
