The National Employment Savings Trust (NEST) has picked JP Morgan Asset Management to run its first high yield bond mandate after an open tender.
The master trust is acting as seed investor for the asset manager's life high yield opportunities fund, which is set up to meet the needs of its members.
This fund, which will aim to generate returns in a low yield environment, will be added to NEST's retirement date fund range.
It is global and will mainly invest in securities with a rating range from BBB to CCC, with the majority of securities rated BB or B.
The provider explained the risk of investing in high yield bonds was factored into the search for a manager that is active and has a good track record.
An initial allocation of £40m - or roughly 3% of NEST's total portfolio - will be reviewed over time.
NEST deputy chief investment officer John St. Hill said: "With long-term interest rates at current low levels, we believe that adding high yield bonds to the portfolio will enhance returns for our members.
"This is a long-term strategic move for us. Diversifying our members' portfolios across a range of asset classes is the best way to manage risks and deliver returns. Like other large institutional investors, we see high yield as an important tool in the box."
JP Morgan Asset Management client adviser Bob Cast added: "NEST aims to provide a high quality low cost workplace pension to millions of people and we're very proud to now be part of this."
The tender, which started in November 2016 and ended earlier this year, received nearly 40 responses.
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