MV Credit launches private debt solution for UK DC pension funds

The £100m fund will invest in illiquid and liquid strategies to meet the needs of highly regulated DC schemes.

MV Credit and US investment management firm Loomis Sayles have launched a private debt solution for defined contribution pension funds.

The MV Dual Credit Fund will offer UK-based DC pensions the opportunity to access private debt markets while ensuring investors have the liquidity they need and comply with regulatory requirements.

The system has been designed to meet the needs of seed investor Smart Pension and launches with £100 million ($137 million; €115 million) of assets from its default fund. However, MV Credit hopes to offer this product to other UK pension schemes and has begun talks with other potential investors.

The fund will have an allocation to private credit, predominantly made up of European senior leveraged loans and a small allocation to subordinated debt to be managed by MV Credit. An additional liquid allocation will be managed by Loomis Sayles Alpha Strategies teams with a global remit focused on corporate credit, bank loans, securitised assets and emerging market debt.

Murtaza Merchant, partner at MV Credit, said: “There has been significant interest from UK DC schemes to obtain access to the private credit market and we are proud to be at the forefront of innovation which addresses this interest. The fund offers investors the ability to access private credit assets whilst meeting liquidity needs in a responsible way.”

The product is the culmination of two years of work between MV Credit and Loomis, both of which are affiliates of Natixis Investment Managers. Merchant added that the fund has been designed with a focus on governance and investment strategy that meets the stringent requirements of UK DC schemes, which include caps on charging.

With most defined benefit schemes in the UK now closed to new members, the defined contribution market is expected to make up a growing part of the pension market which private markets investors will seek to serve. Two years ago, the UK’s NEST pension scheme put out tenders to create private markets solutions for its members with an initial focus on private debt.