Japanese Nikko Asset Management (Nikko AM) has launched a fund dedicated to investing in total-loss absorbing capacity (TLAC) bonds. Managed by its London-based global fixed income team, the firm claims the fund is one of the first of its nature.
It was launched for Japanese institutional investors looking to invest in high yield strategies, but the firm hopes it will appeal to institutional investors in Europe, the Middle East, and Africa. Over €144 million has been raised from Japanese institutional investors for the Global TLAC Bond Fund this year.
TLAC was set as an industry standard by the Switzerland-based Financial Stability Board (FSB) in 2015. It aims to ensure that “globally systemically important banks have enough equity and bail-in debt to pass losses to investors and minimise the risk of a government bailout” according to the FSB, set up in 2009 after the G20 London summit as a successor to the Financial Stability Forum.
“Investing always starts with an in-depth credit analysis. However, once the team gets comfortable with the credit quality of a bank we are willing to go down the capital structure of an issuer,” said the firm’s head portfolio manager of global credit Holger Mertens.
“The final investment decision depends very much on the premium offered by an issuer, we believe this is an area of the market where fundamental research is critical.’’
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