British Pension Pool Picks Managers for New Corporate Bond Fund

A UK public pension pool has chosen managers for its global investment-grade corporate bond fund.

The Local Government Pension Scheme Central’s bond fund will be run by Fidelity and Neuberger Berman’s Europe division. The two were picked from a crop of 70 managers.

Each manager will be responsible for half the mandate, which was not disclosed. However, the plan launched a £2 billion ($2.6 billion) corporate bond fund in November, which was part of the fund’s plan to roll out various pooled fixed income funds in 2019. The fund was looking for active managers who could perform a “consistent, robust, repeatable investment process” in addition to a “low cost, fully transparent, value for money” offering, according to the tender.

Gordon Ross, LGPS Central’s fixed income director, said the retirement consortium chose Fidelity and Neuberger for their “global reach as well as their strong presence in the UK.” He echoed the tender’s requirements, mentioning that the managers follow “robust processes that are repeatable across all credit markets.”

One of Neuberger’s “robust processes” is its outperformance of the global credit/corporate bond index, Alex Gitnick, a portfolio manager at the firm, told CIO. “That’s based on the nature of a process where we add value primarily through bottom-up stock selection … and trying to avoid deteriorating stories [which] could lead to potential very destructive downgrades,” he said.

Gitnick declined to comment on deal-specific details.

The plan has already launched four pooled equity funds. It had been given regulatory approval in January. LGPS Central is monitored by the Financial Conduct Authority, one of the nation’s top regulators.

LGPS Central manages $57.8 billion of assets from nine midlands-based Local Government Pension Scheme funds (Cheshire, Derbyshire, Leicestershire, Nottinghamshire, Shropshire, Staffordshire, Worcestershire, West Midlands Pension Fund, and the West Midlands Integrated Transport Authority). An LGPS is a pension collective that lumps several retirement plan assets into one big plan that handles their investment responsibilities. It is one of eight LGPS operations in the UK.

Fidelity was unable to be reached for comment. The LGPS Central declined comment.

Tags: Fidelity, LGPS Central, Neuberger Berman