The large majority of institutional investors believe structured credit serves as an attractive alternative to fixed income, according to a new survey by Aeon Investments.
The survey, which polled 100 institutional investors in Europe, the U.S. and the U.K., found 87 per cent of pension funds and other institutional investors believe that, in addition to yield, structured credit products provide the potential to improve risk-adjusted returns and serve as an effective diversification tool.
In a press release, Oumar Diallo, Aeon’s chief executive officer, said concerns about central banks tightening monetary policy has pushed institutional investors to increase allocations to structured credit. “Like most respondents, we remain bullish over the medium term and expect structured credit to continue to outperform, particularly in commercial real estate and corporate credit.”
The survey also found interest in structured credit investments varied by asset class. About 91 per cent of the respondents said they’ve increased structured credit allocations to commercial real estate in the past 18 months. Another 83 per cent of respondents said they planned to increase allocations within the next 18 months. And 75 per cent said they’ve made structured credit allocations to specialist areas of corporate finance in the past 18 months, with a similar percentage (73 per cent) saying the intend to do so in the next 18 months.
Also in the past 18 months, 73 per cent of respondents reported making allocations to structured consumer credit and 65 per cent to structured residential real estate credit. In the next 18 months, 69 per cent of institutional investors intend to increase allocations to structured consumer credit and 63 per cent plan to raise allocations to structured residential real estate credit.