Bringing you live news and features since 2013
Bringing you news, views and analysis since 2013
Chess

33360

Multi asset credit strategies find favour with investors as the “least worst option”, finds CAMRADATA whitepaper

RELATED TOPICS​

Credit has become “the least worst option” for the years ahead across the spectrum of return-seeking assets, according to a new whitepaper from CAMRADATA, which notes that UK pension funds are continuing to shift from equities to bonds. 

Credit has become “the least worst option” for the years ahead across the spectrum of return-seeking assets, according to a new whitepaper from CAMRADATA, which notes that UK pension funds are continuing to shift from equities to bonds. 

Multi asset credit strategies (MAC) aim to deliver income, and opportunities for capital growth, by investing in a diversified range of credit assets, while targeting alpha through careful securities selection from within these credit asset classes.

“MAC strategies are attractive as they enable quick movement in allocations between credit classes, while providing risk oversight that spans across the full credit portfolio, offering benefits over a ‘siloed’ approach that results when using different managers for each credit asset class,” says Sean Thompson, managing director, CAMRADATA.

The panel, which included Cairn Capital, Muzinich & Co, Royal London Asset Management, and AON, was pretty satisfied with the performance of MACs so far this year. Given the historic dispersion of returns across types of credit, MACs were attractive even to larger asset owners because of MACs ability to nimbly allocate across the spectrum. 

The consultants noted that pension funds typically deal with interest-rate duration risk in LDI portfolios, which are a separate function from MACs. One panellist said that in their experience MAC is used within a portfolio to generate returns rather than a tool to manage duration exposure.

However, another panellist raised the alarm that credit is not as safe as some people assume, highlighting there is not only insolvency risk but also tail risks such as climate change causing havoc with underlying properties in Mortgage-Backed Securities.

“This is an interesting time to discuss the potential offered by MAC, especially with the likelihood of ratings downgrades creating downward pressure on valuations and attractive entry points for fixed income managers. Our panel considered how well-equipped MAC managers are to tap into opportunities created across credit sectors, including what research and execution skills are needed to deliver success,” notes Thompson.

None of the three MAC managers at the CAMRADATA roundtable said they saw the pandemic crisis coming, but one said he believed the bond markets were complacent in their lack of reaction as the first Covid-19 cases unfolded in Italy.

The panel ended by discussing liquidity. One panellist said the decision ultimately lay with the managers but another noted they had seen increasing client demand for less liquid strategies for a number of reasons – monthly-dealt funds could take more exposure to Leveraged Loans and ABSs, and from another perspective, Qualifying Investor Funds offered more flexibility than daily-dealt UCITs.

One adviser said that most UK pension funds run way more liquidity than they need, but added that underlying liquidity must be aligned, directly and indirectly, with the clients’ cashflow requirements.

Latest News

Bequant has announced that it has launched a new capital introduction platform designed specifically for..
ndosuez Wealth Management has announced the launch of Indosuez Funds - Chronos Green Bonds 2028,..
New global research from industry association Global Digital Finance (GDF) shows most major financial institutions..

Related Articles

graph
The exodus from hedge funds continues with investors questioning unswayed by relatively strong performance from the alternative asset class...
The exodus from hedge funds continues with investors questioning unswayed by relatively strong performance from the alternative asset class...
Waves
A joint statement from BNP Paribas Asset Management, Federated Hermes Limited, Mirova, Robeco and Storebrand Asset Management has been published, entitled The urgent need for better ocean-related data to make informed investment decisions...
A joint statement from BNP Paribas Asset Management, Federated Hermes Limited, Mirova, Robeco and Storebrand Asset Management has been published,..
Frozen soap bubble
From the end of this month, the UK’s Sustainability Disclosure Requirements (SDR) regime comes into force which the Financial Conduct Authority says has a simple aim: “Financial products that are marketed as sustainable should do as they claim and have the evidence to back it up.”..
From the end of this month, the UK’s Sustainability Disclosure Requirements (SDR) regime comes into force which the Financial Conduct..
Global ESG Investing
On May 15 Florida’s Republican Governor Ron DeSantis signed legislation that furthers his ongoing campaign to oppose the role of climate change and ESG factors in state policymaking...
On May 15 Florida’s Republican Governor Ron DeSantis signed legislation that furthers his ongoing campaign to oppose the role of..
Subscribe to the Institutional Asset Manager newsletter

Subscribe for access to our weekly newsletter, newsletter archive, updates on the site and exclusive email content.

Marketing by