Strathclyde Pension Fund is to award £750m (€969m) worth of multi-asset credit mandates as part of the local authority fund’s overhaul of its strategic asset allocation.

The decision to award four mandates comes after the £15.6bn Strathclyde decided to double its allocation to short-term enhanced yield (STEY) strategies to 15%

The new STEY mandates, which will be funded through a 10-percentage-point cut in the fund’s equity allocation, were tendered late last year.

Following the tender, the fund’s pensions committee this week decided to appoint Babson Capital and Oak Hill Capital to oversee two multi-asset credit mandates worth £300m and £150m, respectively.

Both mandates will focus on high-yield debt and syndicated loans, the report to the pensions committee said, adding that it hoped to seed both mandates within two months of the contracts being finalised.

The committee also decided to split a further £300m private debt award between the Alcentra Clareant European Direct Lending Fund II and the Babson Global Private Loan Fund, with the latter beating Partners Group to its share of the mandate.

Strathclyde said the Alcentra allocation would be funded “over time”, and that the Babson allocation would be split between the Babson Global Private Loan Fund, due to close at the end of March, and its successor fund, set to launch before the end of June.

As part of the new STEY strategy, Strathclyde also signed off a new investment approach for a £1bn mandate managed by PIMCO.

The current PIMCO Absolute Return Strategy (PARS) targeted returns of 1.75% above the three-month LIBOR rate over a three-year period, below the minimum 4% cash outperformance desired by the local authority fund as part of the new strategy.

The fund’s pensions committee decided to shift the portfolio to the PARS III strategy, which targeted an outperformance of bonds of up to 5%.

As part of a parallel deployment of capital to long-term enhanced yield strategies, Strathclyde has also boosted its commitment to a local property fund and allocated £50m to the first in-house fund launched by the Pensions Infrastructure Platform.

Topics