Credit, Collections & Insolvency News
New research* ‘Investor Sentiment: Alternative Credit’ from NN Investment Partners (NN IP) reveal increasing scarcity of high return assets followed by political risks are the two biggest issues concerning investors over the next two years. The investment manager says this will fuel growing demand for alternative credit, which delivers attractive returns that have low correlation with public markets, equities and bonds.
The research reveals that 26% of institutional investors believe the increasing scarcity of high return assets will have the biggest impact on their portfolios over the next two years, followed by 21% who cite political risks. This was followed by 16% who say central bank policies, and 15% who said the pace of global growth. Indeed, 22% of investors interviewed anticipate that global economic growth will fall below current levels over the next two years, compared to 20% who predict it will accelerate. Just over half (57%) anticipate growth will remain static
Gabriella Kindert Head of the Alternative Credit Boutique at NN Investment Partners said: “Various asset classes in 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.”
“Our research shows the most attractive features of alternative credit as follows (see infographic 2): 47% of investors describe its ability to offer good absolute risk adjusted returns as ‘extremely’ attractive. This is followed by 37% who say this about its ability to be a credible diversification tool and 30% who describe floating rate coupons offering a natural hedge against rising rates and inflation as an ‘extremely’ attractive feature. The next most attractive feature of alternative credit was identified as being able to offer lower volatility in contrast to equities and liquid bonds, followed by it being a defensive asset class in volatile times.”
As to which alternative credit sources are seen in the most positive light now, 32% of institutional investors say Senior Bank Loans are currently ‘extremely appealing’, followed by 26% who say this about Infrastructure Debt/Project Finance, and 26% who also say this about Commercial Real Estate Loans.