By Daniel Lanyon on 14th February 2017
The Aviva Investors Alternative Income Solutions fund will cater to institutional investors such as pension and insurance companies looking for income away from traditional fixed income.
Aviva Investors, the global asset management business of Aviva, has launched a new portfolio for institutional investors looking for exposure to the alternative credit space.
The open-ended Aviva Investors Alternative Income Solutions fund offers income investors access to illiquid alternative credit strategies while, the firm says, maintaining an overall risk profile in line with BBB-rated investment grade credit.
The strategy is the latest to launch into the fast-growing alternative credit space, where asset managers and platforms seek to capitalise on technology, the disintermediation of banking, ultra-low interest rates and poor returns from regular fixed income. Investors are attracted to alternative credit by high yields and an absence of marking to market, which they hope will improve risk adjusted returns.
Aviva Investors’ new fund provides institutional investors with access to a multi-asset alternative credit portfolio that invests in real estate finance, infrastructure debt, private corporate debt and structured finance.
Barry Fowler, managing director of Alternative Income Solutions at Aviva Investors, says in a low interest rate environment, institutional investors want high-quality cash flows to meet future liabilities with better returns than are available in publicly-traded markets, including government bonds
“Alternative income assets have such characteristics, and typically demonstrate lower defaults and higher recovery rates relative to liquid comparables. The fund takes a multi-asset approach to provide access to a greater array of illiquid opportunities and to increase diversification benefits.”
The portfolio will make regular income payments and reinvest capital subject to liquidity requirements. The fund is denominated in GBP and will invest in GBP, USD and EUR assets; hedging any overseas currency risk.
The Fund targets a gross income return of 3 months GBP LIBOR plus 200 basis points, seeking the best relative value across the private asset spectrum whilst offering diversification from more traditional liquid credit strategies.
It is managed by Barry Fowler, managing director of Alternative Income Solutions, alongside fund managers James Tarry, Ted Jennings, and Craig Mackenzie.
Mark Versey, chief investment officer of Global Investment Solutions at Aviva Investors, says the firm has long been a manager of illiquid alternative income assets through its pension and insurance business, but the platform has also seen strong inflows in recent years growing to more than £22bn.
“Institutional investors can now gain access to our wide-ranging alternative income expertise through the newly launched Aviva Investors Alternative Income Solutions Fund or through the existing offering of bespoke alternative income solutions designed to meet specific client needs,” he said.