On the go: Master trust Nest has taken another step in its move into private credit, with the hire of BNP Paribas Asset Management as a diversified global loans specialist.
BNP Paribas AM will create an open-ended diversified private credit fund for Nest, initially consisting of exposure to infrastructure debt, commercial real estate debt, European mid-market loans, UK small and medium-sized enterprises loans, and US mid-market loans.
The fund will offer active asset allocation, with principal repayments and interest reinvested to provide a total return.
Private credit investments are not traded on a public exchange or market, but are usually directly negotiated loans between an investor (or small group of investors) and the loan’s recipient.
Investors negotiate bespoke rates but are expected to tie up their money until the loan matures, for which they are normally rewarded with better returns – known as an ‘illiquidity premium’.
Nest anticipates employing its first tranche of capital before the new year.
Commenting on the appointment, Nest chief investment officer Mark Fawcett said: “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 AM’s expertise, commitment to ESG and innovation really stood out and caught our attention.”
Guy Davies, UK chief executive of BNP Paribas AM, added: “We are proud to have been selected by Nest and look forward to a long-term strategic partnership with them.
“In recent years we have made significant investments into our private debt platform, our pensions solutions business, and our sustainable investment offering.”
The tie-up with BNP Paribas AM follows Nest’s decision announcement in September to target about 5 to 6 per cent of its assets in private credit, with an initial 12-month commitment of around £400m-£500m in private credit.
BNP Paribas is the latest fund manager to be confirmed by Nest following an open tender in which nearly 40 organisations applied.
The master trust awarded the first private credit mandates to Amundi in global real estate debt and BlackRock in global infrastructure debt, and more are expected to follow.
