BLOG: Asset Management Innovation of the Year - BNP Paribas Asset Management

The Asset Management Awards 2020:
Asset Management Innovation of the Year: BNP Paribas Asset Management

The Asset Management Innovation of the Year award recognises those firms that have brought innovation to the institutional or retail asset management spaces, be that in the area of investment, product design, de-risking or any other area.

BNP Paribas Asset Management (BNPP AM) was the clear winner for this category. In October 2019, BNPP AM and NEST, the DC workplace pension scheme created as part of the UK government’s 2008 workplace pensions reforms to facilitate auto-enrolment, announced their partnership on a diversified private credit mandate. BNPP AM has adapted its 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. They have created an innovative solution offering DC members access to private markets for the first time.

The barriers to entry that have existed historically for DC schemes to access private markets look highly likely to dissipate with the inclusion of private markets, from an eligibility perspective, to the investment platforms upon which DC schemes rely. There is a growing recognition that private markets offer diversification benefits, can improve the sharpe ratio of the default investment offering and can embrace forms of impact investing that have a tangible impact on the real economy.

The open-ended diversified private credit fund consists of exposure to infrastructure debt, commercial real estate debt, European mid-market loans, UK SME loans and US mid-market loans. The fund is a collaboration between BNPP AM’s multi-asset, quantitative & solutions (MAQS) and private debt & real assets (PDRA) investment decisions. MAQS manages the strategic asset allocation to optimise the illiquidity premium of the underlying assets, with the specialist PDRA teams originating private market transactions. The fund offers active asset allocation in Evergreen form, with principal repayments and interest reinvested to provide a total return for NEST’s members.

Origination also benefits from the capabilities of the wider BNP Paribas Group. This dual origination capability offers flexibility and will potentially shorten the traditional three-year ramp-up period. BNPP AM’s one stop solution combines the private credit expertise of BNPP AM as well as custody, loan and fund administration.

This mandate will invest in each asset class according to the ESG principles established by BNPP AM’s Global Sustainability Centre, all of the underlying loans have ESG embedded in their respective investment processes with UK SME loans also included as a form of impact investing.

The judges praised BNPP AM for its excellent work at closing the gap between DC funds and the private credit markets. Well done to all at the firm.

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