BNP Paribas Asset Management (BNPP AM) has been selected by Scottish Widows to structure and manage its new long-term asset fund (LTAF), which will invest in private credit.
Scottish Widows’ new UK domiciled, open-ended LTAF will offer workplace savers access to private markets. The LTAF structure is designed to encourage individuals to invest in long-term, illiquid assets to benefit from higher returns and portfolio diversification.
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BNPP AMM will manage a diversified private credit portfolio that will initially invest in a multi-currency, multi-asset portfolio incorporating infrastructure debt and credit risk assets, expanding into additional sleeves as the allocation grows, potentially including commercial real estate debt, Dutch mortgages, direct corporate loans, asset-backed securities and collateralised loan obligations.
ESG will be embedded into the investment proposition, with the portfolio set to be launched in the second half of the year subject to regulatory approval.
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BNPP AM said that it offers a differentiated bespoke product by utilising its pensions solutions division to design and structure the offering, while drawing on the broader capability of the BNP Paribas Group to offer enhanced ESG credentials, liquidity management, FX hedging, asset origination and relative value asset allocation.
The governance of the new fund will be through a strategic partnership between Scottish Widows and BNPP AM.
“We are excited to be given the opportunity to work with Scottish Widows to design and structure a solution that will offer members diversification, lower volatility, enhanced returns and ESG benefits,” said Philip Dawes, head of distribution (UK and Ireland) at BNPP AM.
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“BNPP AM is aligned with Scottish Widows in wanting to democratise private markets to allow DC savers to benefit from the characteristics that they offer and have been focused on helping the UK market develop in an efficient and innovative way in this respect, for many years.”
Chira Barua, chief executive of Scottish Widows and chief executive of insurance, pensions and investments at Lloyds Banking Group said: “Private assets can be an attractive component of a modern portfolio structure for helping our customers achieve good outcomes in retirement. It’s also a brilliant win-win as it supports economic growth by providing funding to companies with bespoke financing requirements. As one of the UK’s largest workplace pension providers and part of a group whose core purpose is helping Britain prosper, this is an important building block in our endeavour to offer the most distinctive pension proposition in the UK.”
