Growing market volatility will fuel demand for alternative credit
April 19, 2018

New research from NN Investment Partners (NN IP) shows an increasing scarcity of high return assets followed by political risks are the two biggest issues concerning investors over the next two years. According to Investor Sentiment: Alternative Credit, investment managers say this will fuel growing demand for alternative credit, which delivers attractive returns that have low correlation with public markets, equities and bonds.

The research shows that 26 percent 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 percent who cite political risks. This was followed by 16 percent who say central bank policies, and 15 percent who said the pace of global growth. Indeed, 22 percent of investors interviewed expect global economic growth to fall below current levels over the next two years, compared to 20 percent who predict it will accelerate. Just over half (57 percent) think 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: 47 percent of investors describe its ability to offer good absolute risk-adjusted returns as ‘extremely' attractive. This is followed by 37 percent who say this about its ability to be a credible diversification tool and 30 percent 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 percent of institutional investors say senior bank Loans are currently ‘extremely appealing', followed by 26 percent who say this about infrastructure debt/project finance, and 26 percent who also say this about commercial real estate loans."





This site, like many others, uses small files called cookies to customize your experience. Cookies appear to be blocked on this browser. Please consider allowing cookies so that you can enjoy more content across globalcustody.net.

How do I enable cookies in my browser?

Internet Explorer
1. Click the Tools button (or press ALT and T on the keyboard), and then click Internet Options.
2. Click the Privacy tab
3. Move the slider away from 'Block all cookies' to a setting you're comfortable with.

Firefox
1. At the top of the Firefox window, click on the Tools menu and select Options...
2. Select the Privacy panel.
3. Set Firefox will: to Use custom settings for history.
4. Make sure Accept cookies from sites is selected.

Safari Browser
1. Click Safari icon in Menu Bar
2. Click Preferences (gear icon)
3. Click Security icon
4. Accept cookies: select Radio button "only from sites I visit"

Chrome
1. Click the menu icon to the right of the address bar (looks like 3 lines)
2. Click Settings
3. Click the "Show advanced settings" tab at the bottom
4. Click the "Content settings..." button in the Privacy section
5. At the top under Cookies make sure it is set to "Allow local data to be set (recommended)"

Opera
1. Click the red O button in the upper left hand corner
2. Select Settings -> Preferences
3. Select the Advanced Tab
4. Select Cookies in the list on the left side
5. Set it to "Accept cookies" or "Accept cookies only from the sites I visit"
6. Click OK

New research from NN Investment Partners (NN IP) shows an increasing scarcity of high return assets followed by political risks are the two biggest issues concerning investors over the next two years. According to Investor Sentiment: Alternative Credit, investment managers say this will fuel growing demand for alternative credit, which delivers attractive returns that have low correlation with public markets, equities and bonds.

The research shows that 26 percent 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 percent who cite political risks. This was followed by 16 percent who say central bank policies, and 15 percent who said the pace of global growth. Indeed, 22 percent of investors interviewed expect global economic growth to fall below current levels over the next two years, compared to 20 percent who predict it will accelerate. Just over half (57 percent) think 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: 47 percent of investors describe its ability to offer good absolute risk-adjusted returns as ‘extremely' attractive. This is followed by 37 percent who say this about its ability to be a credible diversification tool and 30 percent 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 percent of institutional investors say senior bank Loans are currently ‘extremely appealing', followed by 26 percent who say this about infrastructure debt/project finance, and 26 percent who also say this about commercial real estate loans."



Free subscription - selected news and optional newsletter
Premium subscription
  • All latest news
  • Latest special reports
  • Your choice of newsletter timing and topics
Full-access magazine subscription
  • 7-year archive of news
  • All past special reports
  • Newsletter with your choice of timing and topics
  • Access to more content across the site