Uncertain times prompting demand for alternative credit

By Daniel Lanyon on 19th April 2018

Alternative Credit

An increasing scarcity of high returns assets and increasing political risks are the two biggest concerns highlighted by institutional investors.

Uncertain times prompting demand for alternative credit

More than a quarter (26 per cent) of institutional investors believe the increasing scarcity of high return assets will have the biggest impact on their portfolios over the next two years, according to a survey carried out by NN Investment Partners.

Gabriella Kindert, head of the Alternative Credit Boutique at NN Investment Partners, says that - with a further 21 per cent who cite political risks – demand for non-bank lending assets is increasing.

“Various asset classes within alternative credit are showing an impressive track record, delivering strong lower correlation returns and this, coupled with increasing market volatility, will contribute to many investors wanting to increase their exposure to this asset class. Further, alternative credit has proven to be a defensive asset class in previous cycles.”

The research shows the most attractive feature of alternative credit among institutional investors is its ability to offer “good absolute risk adjusted returns” with nearly one in two as 47 per cent of investors describe it as ‘extremely’ attractive.

This is followed by 37 per cent who say this about its ability to be a credible diversification tool and 30 per cent who describe floating rate coupons offering a natural hedge against rising rates and inflation as an ‘extremely’ attractive feature.

As to which alternative credit sources are seen in the most positive light now, 32 per cent of institutional investors say Senior Bank Loans are currently ‘extremely appealing’, followed by 26 per cent who say this about infrastructure debt/project Finance, and 26 per cent who also say this about commercial real estate loans.

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