The National Employment Savings Trust (NEST) has appointed J. P. Morgan Asset Management to run a new high yield bond mandate, with an initial allocation of £40m.
The auto-enrolment pension provider announced the new fund today, which will be added to the "building blocks" that make up the NEST Retirement Date funds.
It said it will help further diversify members' portfolios and offer attractive returns in an otherwise low-yielding fixed income environment.
An initial allocation will be made of £40m, representing roughly 3% of NEST's total portfolio, although this will be reviewed over time.
NEST, a workplace pension set up by the government, acts as seed investor for the J. P. Morgan Life High Yield Opportunities fund, established by JPMAM to meet the needs of NEST's membership.
Deputy CIO for Nest, John St. Hill said: "With long-term interest rates at current low levels we believe that adding high yield bonds to the portfolio will enhance returns for our members.
"This is a long term strategic move for us. Diversifying our members' portfolios across a range of asset classes is the best way to manage risks and deliver returns.
"Like other large institutional investors we see high yield as an important tool in the box."
St. Hill said he was impressed by J.P.Morgan's robust approach to risk management and commitment to integrating ESG issues into its investment processes.
"There was strong competition for this mandate and we received a number of high quality bids, so we are delighted to be working with JPMAM to bring members these benefits," he added.
Bob Cast, client adviser at JPMAM, said: "We are delighted to be working with NEST to provide a new global high yield bond fund as a building block in NEST's Retirement Date funds.
"NEST aims to provide a high quality low cost workplace pension to millions of people and we are very proud to now be part of this."
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