‘Classic’ credit instruments include government bonds and investment grade credit, which we gain access to through buy and maintain strategies attempt to capture returns with a similar credit rating and duration as the global credit market but with less downside risk, while short duration relies on selecting high yield bonds with short duration, which provides investors with more visibility on cash flows prediction, while offering good liquidity and low exposure to interest rates.
Alternative credit encompasses everything from high yield credit and emerging market debt to more esoteric instruments. We focus on a few of these:
An alternative way to transfer risks from insurers to investors in exchange for an attractive premium, such as so-called catastrophe bonds. They also offer diversification because their returns do not depend on economic factors but on occurrences of natural disaster events.
Non-investment grade debt instruments issued by mid to large-cap companies with above-average gearing levels, they offer diversification benefits and a unique way to gain exposure to private companies.
Commercial real estate loans
Used to finance commercial real estate development, these debt instruments sit high up in the capital structure and often offer a premium to investment grade bonds of a similar risk and rating.
Dutch residential mortgages
Backed by a Dutch government (AAA rating) guarantee, these residential mortgages are used to finance the private acquisition of real estate and are brokered directly to institutional investors
Bank capital solutions
Providing access to a bank’s core assets and thus, diversification of credit risk exposures, bank capital solution transactions are bilateral operations between a bank and an investor that enables the bank to release capital and improve its core Tier 1 ratio, and to develop its commercial activity.
Collateralised loan obligations
A form of securitised debt that combines payments from multiple mid and large cap business loans, these securities enable investors to gain exposure to underlying asset classes and corporate loans, that cannot be reached through classic bond or equity markets.
Rethinking the credit continuum
For many years most investors had little need to look beyond a small group of ‘classic’ credit options. But, after a decade of extreme monetary policy and increased regulation, the need to think differently about credit and embrace the full credit continuum is increasingly apparent.
Why choose AXA Investment Managers
AXA Investment Managers combines specialist insurance knowledge with the full weight of the AXA IM fixed income team’s expertise to deliver bespoke solutions.
Deep understanding of the complex needs of institutional investors
built on a long association with the insurance sector.
Combining long-standing experience and global reach, we have the capacity,
courage and capability to be truly innovative across the credit spectrum.
We aim to minimise operational costs thanks to our team’s ability to
make significant deals and manage large amounts of assets.
Main risks associated with the asset class
• Many of the products are illiquid
• Many of the instruments demonstrate a higher probability of default than investment grade issuers.