Yield-Seekers and their Reasoning for Credit Investments

cliffThe daunting quest for fixed income yield is a tricky undertaking. How much are investors willing to pay for yield within an acceptable level of risk? Public investors have shifted fixed income focus in the past few years to credit funds. Investment consultants and advisors have been routing pension funds into credit investments like leveraged loans. Seeing an onset in potential fee revenue, the larger asset managers are purchasing niche managers in credit strategies. For example, Ares Management LLC purchased London-based Indicus Advisors, a credit manager. External managers are not the only way to have exposure to credit investments. Some of the bigger public pensions have embraced the idea of direct lending. Sovereign funds like Singapore’s GIC have long been actors in this space.

Public investors are channeling capital into speculative-grade bonds.

With increased financial regulation, banks have shrunken their balance sheet, leaving mutual funds and U.S. pensions to pick up the slack. [ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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