The mandate will see BNPP AM create an open-ended diversified private credit fund with initial exposure to infrastructure debt, real estate debt, European mid-market loans, UK SME loans and US mid-market loans. The US component will be originated via a partnership with BNP Paribas Corporate & Institutional Banking’s US leveraged finance group.
The news comes just a month after Nest announced it had selected Amundi and Blackrock to invest up to £500 million ($643 million; €580 million) to invest in real estate debt and infrastructure debt respectively.
The fund will be operated as a collaboration between the multi-asset, quantitative and solutions division and the private debt and real assets divisions. MAQS will manage strategic asset allocation to optimise the illiquidity premium of the underlying assets while PDRA will originate private markets transactions.
It will operate on an evergreen basis with principal repayments and interest reinvested to provide a total return for Nest members.
Last month’s mandate award to Amundi and Blackrock was Nest’s first foray into private markets investment after a year-long tender process where the fund sought asset management solutions to enable its defined contribution members, many of which have small pension pots, to gain exposure to private markets deals.
Philip Dawes, head of sales for UK and Ireland at BNPP AM, said: “We have adapted our existing approach to managing diversified private credit and cashflow-driven investing on behalf of DB schemes in order to be able to offer DC schemes access to the same private market investment capabilities.”
The mandate will invest according to the ESG principles established by BNPP AM and incorporate impact investing via its support for UK SME loans.
Mark Fawcett, chief investment officer for Nest, added: “Nest’s move into private credit is an important step in developing our investment strategy and helping to deliver the strong risk-adjusted returns we want for our members. In a very competitive tender process BNP Paribas Asset Management’s expertise, commitment to ESG and innovation really stood out and caught our attention.”
Nest was set up by the UK government to support its pensions auto-enrolment policy, which sees most UK workers automatically enrolled in a workplace pension scheme. Nest acts as a low-cost option available to all employers regardless of size. It has grown rapidly since it was established in 2008 and stated it had 7.9 million members in July this year.