Kempen Capital Management has launched a solution that enables professional investors to access the structured credit market in a cost-efficient manner.
The Diversified Structured Credit Pool (DSCP) is a pool comprised of long-only structured credit funds carefully selected by Kempen, through which investors are able to gain access to three best-in-class structured credit specialists (GoldenTree, LibreMax and One William Street).
Kempen has a long history investing in structured credit managers since 2009, as part of its flagship fund of hedge funds (FoHF) Kempen Orange Investment Partnership. Its hedge fund solutions team includes three portfolio managers, who each have more than 15 years’ experience in selecting and monitoring alternative asset managers.
DSCP is currently targeting a net return of 4 to 6 per cent pa (in USD; unhedged) and will invest in a mix of investment grade (IG) and sub-IG bonds, with a tilt towards IG bonds. Its interest rate duration is expected to be two to three years and geographically, the fund is expected to be 80 to 85 per cent allocated to the US and 15 to 20 per cent to Europe.
Structured credit is a collective term for bonds backed by various types of assets including residential mortgages (RMBS), commercial mortgages (CMBS), senior secured loans (CLO’s), and consumer loans (consumer ABS).
Remko van der Erf (pictured), co-head hedge fund solutions at Kempen says that while structured credit is one of the largest fixed income credit markets globally at USD2.8 trillion, it has been overlooked by many investors given the higher complexity, lower liquidity and eligibility criteria involved.
“While it is a more complex asset class, in return it provides higher spreads than similarly rated corporate bonds, as well as protection against rising rates, and exposure to the consumer market,” he says. “By working with the right partner who can help to navigate the market, professional investors can access a niche alternative to high yield.
