The new strategy secured a £80m commitment from “a large UK defined benefit pension scheme”, fund manager Rory Sandilands tells Impact Investor.
Aegon Asset Management (Aegon AM) has launched a new strategy which will focus on investments in companies with credible, actionable decarbonisation plans. The Aegon Investment Grade Climate Transition Fund is targeting a 30% reduction in carbon footprint by 2029, and portfolio net-zero alignment by 2040.
While the new fund will mainly focus on global investment grade corporate bonds, it may also include high yield bonds and cash, according to Aegon AM, which had €325bn in assets under management as of the end of March.
The new strategy aims to outperform the Bloomberg Global Aggregate Corporate Index, which is a multi-currency benchmark of global investment grade, fixed-rate corporate debt, over rolling 36-month periods, net of fees. The strategy will also focus on aligment with the financial, climate, and ESG goals of its clients, Aegon AM said.
The current bond market environment, with elevated corporate bond yields, strong corporate fundamentals and a supportive rates cycle, offers a “compelling opportunity” for investment grade investors, according to Aegon AM fund manager Rory Sandilands.
“At the same time, the need for credible climate action has never been greater. With our proprietary climate transition research, disciplined security selection, and proven track record, we believe the fund is well-positioned to deliver resilient, risk-adjusted returns while supporting the transition to a low-carbon economy,” Sandilands said.
The new strategy will be co-managed by Sandilands, Alexander Pelteshki and Kenneth Ward, with support from the firm’s global credit research and responsible investment teams.
£80m seed capital
The new strategy was launched with a £80m (€92m) investment from “a large UK defined benefit pension scheme as part of a larger multi-asset credit strategy”, Sandilands told Impact Investor.
Aegon AM has “a long history” of managing ethical and sustainable strategies across both fixed income and equities, Sandilands said. He went on to say the new strategy builds on the success of the Aegon Global Short Dated Climate Transition Fund, which was the first to use Aegon’s proprietary climate transition framework and has grown to more than £850m.
“Given the size and depth of the global investment grade bond market there is capacity to grow both strategies significantly going forward,” Sandilands said.
The new fund will invest in “a high conviction, relatively concentrated portfolio of our best ideas from our bottom-up driven research process”, Sandilands said. “Climate transition is a multi-year process. Investee companies that demonstrate progress towards their transition goals are likely to be long term investments. Those that do not will be be rotated out,” he added.
