Three quarters (75 per cent) of institutional investors believe pensions schemes will increasingly focus on structured credit products, research from Aeon Investments has revealed.
When asked to identify key reasons behind the growth in demand for structured credit, the top reason given by respondents was the desire to seize new investment opportunities.
The next most important feature was the need to protect against macro uncertainty, followed by an increased drive for greater diversification, and the ability to gain access to environmental, social and governance (ESG) benefits that can exist in sub-asset classes.
Another growing attraction of structured credit identified in the survey was that it can increasingly be customised to investor needs, leading to more bespoke maturity and return profiles that can be appealing to investors.
Indeed, the survey also found that 70 per cent of pension funds and other institutional investors surveyed expect the level of customisation in the structured credit market to increase between now and 2025.
Aeon Investments also discovered that 65 per cent of those surveyed anticipate allocations to products focusing on residential real estate will see an increase and 60 per cent also expect an increase in allocations to commercial real estate.
In addition to this, some 50 per cent of respondents expect an increase in investment inflows into structured credit vehicles focusing on consumer credit such as student loans and auto credit/leases.
Commenting on the findings, Aeon Investments managing director, Evgeny van der Geest, stated: “Our research shows that institutional investors in the UK are increasing their focus on structured credit.
“Not only do they offer attractive yields, but this growth is being driven by a desire to seize new investment opportunities.
“The structured credit market has seen huge developments in recent years, in terms of maturity and transparency, as well as the ability for it to be increasingly customised to investor needs – all of which are driving demand.”
Investors predict increased focus on structured credit
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