National Employment Savings Trust, London, hired Amundi and BlackRock to manage its default fund's first private credit allocation of £400 million ($486 million) to £500 million.
Amundi and BlackRock were selected for their innovation and cost-efficiency from nearly 40 organizations that submitted proposals, according to NEST. Through global mandates, the managers will invest in European and U.S. real estate debt and infrastructure debt, respectively.
NEST will initially target 5% in private credit, deploying capital as soon as October for an initial period of 12 months. The allocation will be part of NEST's growth portfolio.
"NEST is taking a significant step in increasing the investment opportunities for our members and following the example of leading defined contribution schemes overseas by moving into private markets," Stephen O'Neill, head of private markets, said in a news release.
"We're long-term investors — our youngest member is just 16 and she could be investing with us for more than 50 years. She's the perfect person to be entering into private markets. We can be patient with her investments so she'll benefit from the illiquidity premium you get with these types of loans," Mr. O'Neill added in the release.
Under the mandate, NEST might still appoint loans manager at a later time.
The £6.9 billion multiemployer defined contribution plan is funding the allocation through increased contributions, which have been invested in short-duration bonds, investment-grade credit and high yield — natural funding sources, CIO Mark Fawcett said during a press briefing Thursday.
Mr. Fawcett also said during the briefing that NEST has been working hard to create structure to invest in illiquid assets. "We believe there is a private credit premium," he said, adding that illiquidity is not a challenge for NEST.
"Our challenge is getting the money into the market, not out," he said.
NEST will target a quarterly valuation or a monthly one if there is a shift in the market, he said. "Arguably, we could have even more illiquid assets, in the future," he said, adding NEST could go up to 10%.
Separately on Thursday, NEST launched a subsidiary company aimed at securing co-investments in private markets.
The subsidiary, NEST Invest, which is yet to receive authorization from the Financial Conduct Authority, will provide advice to NEST's board on new investment opportunities, enable NEST to co-invest in private markets and direct fund managers to use derivatives in order to help invest cash flows and manage risk efficiently.
"NEST is going to be responsible for £450 million new contributions every month," Mr. Fawcett said in the news release. "We're becoming one of the largest players in the U.K. pension's market and our investment strategy is evolving to reflect that."
