Schroders launches Multi Private Credit Fund to meet the growing demand from UK DB pensions for access to private assets

Schroders has launched a Multi-Private Credit Fund (MPCF) in response to the growing demands from UK Defined Benefit (DB) pension schemes to allocate to the long-term and alternative income streams that private credit asset classes can offer.

The Schroder Adveq MPCF is a single closed-ended vehicle designed to enable small and medium-sized pensions schemes to access a diversified portfolio of private credit in the most efficient structure.

It will invest in a range of private credit assets, including corporate direct lending, real estate debt and infrastructure debt.

Due to the illiquidity premium these assets can deliver, investors have the potential to benefit from a higher yield pick-up over publicly traded fixed income assets. The fund will offer the best of Schroders’ in-house private credit expertise combined with rigorous manager selection on external funds.

MPCF will draw on Schroders’ specialist private asset platform Schroder Adveq and the breadth of Schroders’ Private Assets Solutions business.

Schroders’ recent Institutional Investor Study 2020 indicated that investors plan to ramp up their allocations to private assets from 12.8 per cent a year ago to 14.1 per cent over the next 12 months, with 46 per cent stating that an increase in their allocations to private assets would help manage risk.

Russell, Smith, Co-Head of UK Institutional, Schroders, says: “UK DB pension schemes are increasingly looking to harness the alternative and consistent income streams that private credit assets can deliver. Working closely with Schroders’ in-house private credit specialists, with targeted support from external managers, this fund will provide a one-stop solution to a diversified portfolio of private credit asset classes for UK schemes.

“UK DB pensions are increasingly mature and thinking about their end games. MPCF is designed to deliver a source of contractual cash flows that will help our clients meet their long-term objectives.”

In addition to the broad sector exposures, MPCF will be geographically diversified with a focus on investment opportunities in the US and Europe.  

Ji-Eun Kim, Head of Multi-Private Asset Investments, Schroders, says: “The low yield environment has made it increasingly difficult for UK DB schemes to meet their long-term income targets. A diverse blend of private credit assets delivered by Schroders’ investment expertise has the potential to meet the needs of our clients who would previously have relied on traditional fixed income assets.”

The fund will be supported by Schroders Private Assets and Alternatives business which manages GBP45.3 billion in assets, including private equity, hedge funds, infrastructure finance, insurance-linked securities, commodities, real estate, impact investing and securitised credit.