Asset manager BNP Paribas has been awarded a private credit mandate by Nest following a competitive open tender.
BNP Paribas will create an open-ended diversified private credit fund with exposure to infrastructure debt, European mid-market loans, real estate debt, US midmarket loans, and UK small- and medium-sized enterprise loans.
The announcement at the Pensions and Lifetime Savings Association (PLSA) conference in Manchester today (17 October) follows one made last month when the pension provider confirmed Amundi and BlackRock as managers of global real estate and infrastructure mandates.
NEST expects to commit around £500m across its private credit mandates over the next 12 months but said it "will not force money" into the market.
The scheme aims to have an initial allocation of between 5% and 6% in total assets in private credit after an initial "ramp up" phase next year.
Speaking at the PLSA conference, NEST chief investment officer Mark Fawcett said: "NEST's movement into private credit is an important step in diversifying our portfolio, helping to deliver the strong risk-adjusted returns we want for our members. These mandates will allow us to earn a premium over public bonds throughout the credit cycle."
BNP's pledge to support ESG principles was a significant factor for its success in the tender process, added Fawcett.
"They've found a way in which we can confidently allow our members to benefit from the lower volatility and enhanced return that unlisted debt can offer and we hope to see more defined contribution (DC) schemes follow in our footsteps."
BNP Paribas UK and Ireland head of sales Phillip Dawes said the asset manager had adapted its current approach to managing diversified private credit and cashflow-driven investing on behalf of defined benefit schemes "in order to be able to offer DC schemes access to the same private market investment capabilities."
The US component of the mandate will be originated via a partnership with its corporate and institutional banking arm's US leveraged finance group, BNP confirmed.
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