UK – The 240 million pound (367.3 million euro) pension fund of private health care insurer Bupa has awarded an 18 million pound (27.5 million euro) high-yield bond mandate to Muzinich & Co., with the high-yield specialist saying there is an “explosion” in the asset class.

Bupa’s move is part of an asset-class review at the fund coordinated by Watson Wyatt’s Nick Horsfall.

“The Trustees, adopting recommendations contained in the Myners Report, and after taking advice from Watson Wyatt, have resolved that diversification into complementary asset classes, such as High Yield Bonds, will enhance the Bupa Pension Scheme’s returns within an appropriate asset allocation strategy,” said Arthur Walford, chairman of the trustees.

The bulk of the fund’s portfolio has been equities, with 82% of its assets divided roughly evenly between UK and overseas equities. Just 11.2% was invested in UK fixed income, with a further 2.8% invested in index-linked gilts.

“Bupa is our first UK pension fund client and we are delighted to have been awarded this very important piece of business,” said Francis Paxton, head of institutional marketing at Muzinich. He said the firm specialises in High-yield bonds.

He added that its assets under management rose by almost 500 million dollars in 2002, boosted by European investors. “We are witnessing an explosion in the asset class, and all the signs are that 2003 will see continued flows of new funds in high yield, as investors seek haven from equities.”

Muzinich has around 3.4 billion dollars in assets under management in high yield and investment grade bond mandates. It says on its website that it has “an analytically driven approach to the corporate bond market” and that “we are prudent investors looking for well-run companies at attractive valuations”.