Institutional investors want more alternative credit exposure

By Daniel Lanyon on Thursday 29 March 2018

Editor's PickAlternative Lending

Non-bank lending is increasingly being sought by institutional portfolios.

Institutional investors are planning to hike their allocations to alternative credit assets, according to new research from NN Investment Partners.

As portfolio managers, pension funds, family offices and other institutional investors have hunted for income in a low-yielding fixed income environment the world of non-bank loans and alternative financing assets have become increasingly mainstream.

This has lead to a greater uptake of alternative credit assets within portfolios as well as suggestions of greater allocations to come.

The research, part of a report entitled Investor Sentiment: Alternative Credit found that institutional investors overwhelmingly expect and rising interest rate environment and as a consequence more than a third (37 per cent).

In addition new entrants are still looking at the asset class. Over the next 12 months, 14 per cent of institutional investors are expecting to invest in alternative credit for the first time and 45 per cent who already invest in the asset are planning to increase their allocations.

Gabriella Kindert, head of alternative credit at NN Investment Partners says the world of non-bank lending assets has evolved rapidly in recent years to become a larger and broader universe of different niches.

“Investors are increasingly looking to increase their exposure here to generate better risk adjusted returns, diversify their portfolios and obtain access to ESG related credit exposure,” she said.

Should interest rates rise, she adds, alternative credit will also look increasingly attractive when compared to traditional fixed income.

“In 2017 we saw a 33 per cent increase in flows to our alternative credit strategies when compared to 2016,” Kindert said.

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