France’s $28bn ERAFP tenders for emerging market corporate bond mandate

Fund also awards currency hedging mandate.

ERAFP, France’s public service additional pension scheme, a 100% SRI investor with €28bn in assets, is looking for a manager for a €160m emerging markets corporate bonds mandate.
The new segregated mandate, which will be managed according to the fund’s specific ESG guidelines, could rise to €300m within three years, according to Olivier Bonnet, ERAFP’s Head of Asset Manager Selection.
ERAFP said the selected manager would be charged with investing in investment grade corporate or quasi-sovereign debt from emerging regions: Asia ex Japan, Latin America, Eastern Europe, Middle east and Africa. The debt should be issued in major currencies: USD, Eur, GB. Managers will also be able to hedge interest rate risk by investing in cash funds, rate cover or credit risk products.
ERAFP said the initial mandate tender will be for five years for successful management of the brief, with potential for prolongation for a further two successive 1-year periods. It said the duration reflected its belief in bond investment over several economic cycles.
Tenders or requests to participate in the manager selection process must be received by May 24 at midday and sent to ERAFP’s Véronique Nansot, ERAFP has also announced that independent currency specialist, Millennium Global, has won an active mandate to manage the hedging of its foreign exchange risk, citing the “robustness” of the firm’s “proposed management process” as its rationale for selection. The new currency overlay strategy will include both a passive component and a “dynamic component”, according to the press release.
Two standby management mandates were also awarded to BNP Paribas AM and Russell Investments, following the selection process launched in December 2017. The notional amount hedged at the start of the mandate is expected to be around €2bn. The initial term of the mandates will be four years, with ERAFP having the option to renew the contract for two successive two-year periods. The investments must be made from a long-term perspective and comply with the institution’s SRI framework, which is based on five values: respect for the rule of law and human rights; social progress; social democracy; environment; and standards of governance and transparency.
ERAFP is one of the world’s largest public pension funds in terms of member numbers, with over 4.5m beneficiaries, 45,000 employers and nearly €1.8bn in annual contributions, making it one of the fastest growing institutional asset pots in the world, all of which is outsourced to third party managers.