Growing market volatility will fuel demand for alternative credit, a survey found.
A report called ‘Investor Sentiment: Alternative Credit’ from NN Investment Partners (NN IP) said demand for alternative credit will be driven by the increasing scarcity of high return assets and political risks, which investors cited as their biggest concerns.
The survey of 100 international institutional investors found that nearly half said ability to offer higher absolute risk-adjusted returns was the main benefit of alternative credit.
This was followed by 37% who cited its ability to be a credible diversification tool.
A third said floating rate coupons offering a natural hedge against rising rates and inflation was an “extremely attractive” feature.
Senior bank loans were the most popular type of alternative credit for over a third of those surveyed while just over a quarter found infrastructure debt/project finance attractive.
Gabriella Kindert, head of the alternative credit boutique at NN Investment Partners, said various alternative credit asset classes had “impressive” track records, delivering strong lower correlation returns which coupled with increasing market volatility, would contribute tomany investors wanting to increase their exposure to this asset class.
She added: “Further, alternative credit has proven to be a defensive asset class in previous cycles.”
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