9Questions is our Q&A series featuring key decision-makers in the corporate credit markets — get in touch if you know who we should be talking to!

Last month, UK’s The People’s Pension allocated £260m to Invesco to manage a triple-A focused CLO mandate. The allocation will form around 5% of the scheme’s default fixed income allocation, combining direct CLO exposure with Invesco’s triple-A CLO ETFs.

Charlotte Vincent, co-head of fixed income at People’s Pension, talks to 9fin about her involvement in CLO warehouse financing in her loan trading days, the ability of CLOs to diversify the pension’s fixed income, thoughts on going down the CLO capital structure, the importance of ESG and her career as head of science.

1.What initially drew you to consider CLOs as part of your portfolio?

I've known CLOs for a long time. I first came across the asset class 20 years ago when I worked as a credit flow trader. I used to do the warehousing for CLO managers back at a time where banks made money from doing that. I've always loved and understood the asset class. It's one of those asset classes that's had bad press from 2008, even though they did really well and did exactly what they were supposed to do. They had zero defaults on the triple-As and double-As — you have to go to the junior tranches to find defaults. There's also a complexity to them. Every person who loves CLOs has been at a dinner party trying to explain the wonderful structure (I always use a champagne analogy, but it doesn't really work because it's the wrong shape!). For me, it doesn’t have that complexity to them, and I know the taint was not fair.

But the main reason is, as an LP, my focus is always the best outcome for the members. The reason why CLOs, especially the triple-As, are so attractive is because they offer a massive diversification for us — and on multiple levels. You've got diversification of managers. You've also got the diversification of industries versus something such as the corporate bond IG index, which is quite skewed towards the financials. You also have the diversification across the vintages, so you're not just buying something that's been issued today or going to have a big maturity wall.

Of course, the public markets are very good at producing data. But have they looked at a CLO trustee report with over 100 pages with a huge level of detail and transparency? The CLO structure is also attractive. Not only do you have the waterfall, you also have the IC test and diversion of cash flows. I don't think there's other asset classes that have a self-curing mechanism.

2. Why did you decide to access the asset class through an ETF rather than a traditional fund, or direct investment?

We have direct exposure and ETF exposure. I think we're a bit more in the ETF at the moment, but the target is to be roughly 50/50. But that might fluctuate with market conditions. For us, traditionally, we have segregated mandates, and direct exposure makes a lot of sense. The ETF for us was partly a diversification aspect but it was also an amazing way to be able to scale up an investment quickly.

When we put in the £260m, it was done in a day, and we were immediately able to put money to work. If I had been doing direct exposure, we probably would have had a rather larger ramp up period to be able to accommodate that. The UCITS ETF format is also how we would set up a direct exposure in terms of diversification and risk retention. We like the UK/EU Securitisation Regulation’s 5% risk retention rule which ensures managers have “skin in the game,” providing a strong alignment of interests.

3. How does the CLO ETF fit within your broader fixed income, or alternatives allocation?

Another aspect we liked about CLOs is that they are floating rate. Most of our current fixed income portfolio is fixed and this will be our first exposure to a floating rate instrument. We're quite conservatively positioned as an LP because we're a pension fund. The growth aspect is often looked for in equity portfolios, so we complement that with government bond exposure, IG, emerging market debt and high yield.

4. What were the main factors you evaluated before making the investment?

Invesco is our main fixed income partner. Partly it was because of that partnership that we were able to leverage, but another aspect was ESG.

While the CLO market has amazing trustee reports, ESG has never been a massive part of those. However, as a long-term asset owner, we truly believe that climate risk is a material financial risk and really do believe that should be represented. It's one of the few weak points of CLOs. They're not public. They haven't had to do lots in terms of ESG data. But the good news is that everyone who's in CLOs knows the leveraged loan market very well and carries out massive amounts of research.

When we were talking to potential partners, everyone said they could give us data on the leveraged loans that they had, but not the ones they don't cover. There's a whole load of deals in the CLO market that CLOs buy but are never traded again.

Our pushback to Invesco was that we require 100% and need to have full understanding of every single loan that is in any CLO that we have invested in. That's quite a big ask. They came back and made a brand-new partnership to ensure that every loan has enough data for us to measure our responsible investment aspects.

Across our IG tranches we have a net zero target — we haven't put that over the CLOs, because it wouldn't really be appropriate because of that data aspect.

5. What regulatory and liquidity challenges might a DC pension scheme face when investing?

For us, risk retention compliance is a must, which Europe has and the US maybe, 20%. Even if that wasn't a legal rule, we would do it anyway because I think having that alignment of interests is essential, and I think that it works really well.

I don't think CLO ETFs would be great going down the capital structure. Triple-A’s are super liquid not only because they are the most senior tranche, but because they are the biggest. Looking at the double-B tranches, they're tiny. You can't get that liquidity. As soon as you have an ETF, which is daily liquidity, with something which doesn't trade with daily liquidity, that mismatch means it is very hard for us to do. It works until it really, really doesn't. Future investments would likely be more direct investments than via ETFs.

6. What role do you see structured credit playing in your portfolio over the next few years?

I think credit opportunities which involve CLO mezz tranches, are really interesting, as well as CLO equity. Part of being a DC master trust is that we will come to these decisions, but this takes time. We do a lot of research. We must get everyone comfortable. Our focus is always going to be on member outcomes, and so we've got to make sure we've done all our due diligence. We are still doing the research aspects of that.

I do love CLOs as an asset class, but at the same time, as you go down any part of the capital structure, the diligence and the focus has to obviously increase. I will continue to always be interested, and we'll always be scouting, but not in the particularly near future.

7. Looking ahead, what kinds of new strategies or structures are you most interested in adding to your allocation mix?

We’re also actively scoping a range of opportunities beyond CLOs. These include asset backed securities and mortgaged backed securities and leveraged loans. We’re also exploring private credit and infrastructure, which can provide additional sources of income and diversification. These strategies are designed to broaden our opportunity set and strengthen portfolio resilience in a dynamic market environment.

8. How has the macro environment in 2025 affected the fixed income portfolio performance? Will current macro environment affect allocations going forward?

It’s been a strong year for fixed income overall, supported by moderating inflation and stabilising interest rates. Duration-sensitive assets have delivered solid returns, while credit spreads have remained tight, benefiting our credit allocations. Looking ahead, the current macro environment - characterised by gradual central bank easing and uneven global growth - will continue to influence our positioning. We expect to maintain a cautious stance, whilst selectively adding to credit and alternative income sources to capture opportunities in a more normalised rate environment.

9. Between your loan trading career and your time at People's Pension, your LinkedIn states that you taught science in schools! What was your favourite science experiment?

There’s two answers to this. If you were talking about in the lab, I love Molymods.

But the real answer is that as head of science, every year I got to take my pupils to CERN to see the Large Hadron Collider. It’s the place that inspired every pupil I ever took there.

CERN is one of the most beautiful places to go. Everyone should go. You can book it on their website two weeks in advance. They take you on a tour, and they take you to one of the two, Atlas and CMS. As well as seeing the experiment and taking you to the rooms, they've also got three permanent exhibitions.

You have every single university from the world working together to help build this and doing experiments together. It’s a beautiful example of how science can bring people together.

Explore our full collection of 9Questions interviews here.