The Wolverhampton based West Midlands Pension Fund will seed the fund
LGPS Central launched a buy and maintain sterling investment grade credit fund with initial seed investment of £650m from the West Midlands Pension Fund (WMPF).
The fund - developed in response to discussions with the WMPF as part of its strategic asset allocation review – aims to provide a "durable" investment option "tailored to withstand market cycles while delivering reliable cash flows and steady returns".
The strategy is structured as a sub-fund within LGPS Central's authorised contractual scheme. WMPF have confirmed initial seed investment of circa £650m, with the potential for further commitments from other partner funds in the future.
LGPS Central investment director for fixed income Ann-Marie Patterson said: "Through a rigorous development process, this fund aims to withstand various credit cycles and deliver consistent performance."
Patterson added that the strategy focuses on constructing a portfolio with low default risk, emphasising sectors with high asset backing and resilience to disruption.
The fund will concentrate on sterling-denominated, investment-grade credit with global exposure, including corporate bonds, securitised credit, hybrids, and covered bonds. While benchmark-agnostic, it aims to hold at least 60% in sterling investment-grade credit, ensuring both diversity and a portfolio of robust high-quality credit.
The buy and maintain strategy's aim is to hold securities until maturity with the expectation of reinvestment, trading only when significant value can be added, preserving the fund's low turnover and predictability, providing a predictable cash flow if income is required.
Legal & General (L&G) Asset Management has been selected to manage the fund, following a procurement process.
L&G Asset Management head of strategic clients James Sparshott said: "We are delighted to have been chosen by LGPS Central to deliver a high quality, low turnover buy and maintain portfolio. We are seeing a significant increase in demand for buy and maintain from our LGPS clients, often with a focus on delivering stable credit market returns with low risk and cashflow provision. We are thrilled to play a role in offering this investment strategy to their partner funds."
The move comes as the fixed income team at LGPS Central has been expanded with three new appointments as its assets under oversight grow. The pool said the new appointments "reinforce and extend the team's expertise in managing global bond portfolios, including emerging market debt and investment grade credit".
