Royal London Asset Management has launched the Royal London Buy & Maintain Credit Pooled Pension Fund. It has secured an initial investment from existing client Volvo Corporate Trustee.

The fund consists of a globally diversified portfolio that captures the illiquidity premia and market inefficiencies that exist in Sterling credit markets.

RLAM says the fund differentiates itself through being able to look wider than just credit benchmarks for attractive opportunities. It's also aiming to achieve significant exposure to bonds with first claims over assets which should reduce the probability and impact of defaults over the long term.

The fund will avoid on the other hand exposure deeply subordinated financial debt, reflecting the higher optionality on income payments/maturity payments and the potential for greater impairment risk which makes it a less suitable investment for buy and maintain/liability led investors.

Finally RLAM say that it's transaction costs and turnover are lower than typical actively managed portfolios, which should minimise costs.

The fund will be managed by Shalin Shah, who joined RLAM in 2008 and has worked closely on the development and management of a number of segregated buy and maintain credit strategies. He will be supported by the 17-strong fixed income team at RLAM.

“Exploiting the inefficiencies in credit markets is central to RLAM’s investment process and philosophy and our buy and maintain strategy makes this relevant to the needs of pension schemes," said Shah. 

"The new fund builds on the success of our current buy and maintain client mandates and creates a solution suited to the needs of other, potentially smaller, pension schemes.”

RLAM has been offering buy and maintain fixed income solutions since 2011 and now manages over £2.5bn in the strategy for a range of pension clients. It's new fund strategy is based on the existing buy and maintain strategy, now extended to offer a pooled solution for pension fund clients looking to gain exposure to attractive credit bond assets.

There is no benchmark for the fund, it is instead managed on a buy and maintain basis, with an overall credit spread at inception that is in excess of 1.2%. This credit spread offers an attractive return in excess of typical pension fund liabilities such as high-quality government bonds.

“We decided to invest into RLAM’s pooled buy and maintain credit fund following our positive experience with our existing segregated buy and maintain mandate, which has fulfilled our investment objectives. The pooled fund will enable our smaller scheme to achieve similar investment targets as our larger scheme," said a spokesperson for Volvo Corporate Trustee.