Published: November 26, 2024
We are pleased to announce the launch of a new Buy and Maintain Sterling Investment Grade Credit Fund, developed in response to discussions with West Midlands Pension Fund (WMPF) as part of their Strategic Asset Allocation review and an increased appetite for sterling based corporate bonds.
This fund, structured as a sub-fund within LGPS Central’s Authorised Contractual Scheme (ACS), provides our Partner Funds with a durable investment option tailored to withstand market cycles while delivering reliable cash flows and steady returns.
The strategy emphasises a low turnover, “Buy and Maintain” approach, designed to benefit from LGPS Central’s ACS pooled vehicle, which provides cost efficiencies, flexibility, and liquidity for public market investments. WMPF have confirmed initial seed investment of circa £650 million, with the potential for further commitments from other Partner Funds in the future.
Our Investment Director for Fixed Income, Ann-Marie Patterson, commented, “Through a rigorous development process, this fund aims to withstand various credit cycles and deliver consistent performance.” She 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 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.
L&G Asset Management has been selected to manage the fund, following a thorough procurement process. As one of Europe’s largest asset managers, L&G brings substantial expertise, with over £60 billion already managed on behalf of LGPS clients.
James Sparshott, Head of Strategic Clients at L&G Asset Management 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 Fixed Income Team at LGPS Central has recently been strengthened with three new appointments as assets under oversight grow. These new appointments reinforce and extend the team’s expertise in managing global bond portfolios, including emerging market debt and investment grade credit.
