PPF in £400m direct lending mandate with Pricoa

The £22 billion Pension Protection Fund based in the UK is looking to invest £400 million in direct lending over the next two years.

The Pension Protection Fund (PPF) has awarded Pricoa Capital Group with a £400 million (€548.5 million; $631.2 million) mandate to invest in direct lending to corporates, primarily in the UK, PDI understands.

PPF wanted to diversify its fixedincome portfolio and help it meet its funding objectives, Barry Kenneth, chief investment officer at the pension fund manager, said in an emailed statement. Following a tender process, PPF selected Pricoa, a subsidiary of Pramerica Investment Management and Prudential Financial, for the firm’s experience and long track record in the strategy, he added.  

The PPF, which was set up to pay compensation to members of bankrupt company pension schemes, is planning to invest the capital over the next two years depending on market conditions.

The investor launched a tender in the early part of 2014 to find a manager to oversee at least £150 million.

Assets under management at the PPF were £22.6 billion, as at 31 March 2015. The fund said in July 2014 that it is aiming to move towards a ‘hyrbrid asset allocation strategy’ whereby it will allocate more capital to less liquid assets and in turn try to achieve excess return and liability matching properties for its portfolio.

Alternatives are set to increase from 20 percent to 22.5 percent and could reach 25 percent, according to the fund’s latest annual report. Hybrid assets (illiquid assets with hedging characteristics) could increase to 12.5 percent of its allocation.

In March 2015, the fund said that the next significant change in its investment strategy is to consider bringing some of its investment functions in-house and the fund expects to move forward with the project during the year.

Pricoa Capital Group is a subsidiary of Prudential Financial headquartered in the US. It is a fixed-income manager with $948 billion in assets under management, as of 30 June 2015.

Pricoa did not respond to a request for comment at time of publication.

This article was amended on 26 August to reflect that the mandate is made with Pricoa Capital Group, a subsidiary of Pramerica Investment Management.