Secured finance

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Insight is an active fixed income manager dedicated to working in partnership with its clients to help them meet their investment goals.

As pension funds continue to mature, our clients are increasingly telling us that they need to:

  • increase the certainty of returns through contractual cash-flows
  • generate higher yields without taking additional credit risk
  • diversify beyond mainstream credit

We strongly believe that institutional investors should consider integrating secured finance investment strategies into their portfolios in order to help achieve these objectives.

Secured finance - what can it help solve?

Watch our video to hear Jeremy King, Head of Business Development, describe how we work with investors to help meet their needs through secured finance investing.

Benefits

Secured finance strategies can provide greater yield and lower risk than similar quality credit opportunities. In particular, they provide:

  • A yield premium: there is an excess spread available to investors relative to investment-grade corporate credit without having to compromise on credit quality, due to the lower supply of credit to the market. What drives returns in secured finance?
  • Greater cashflow certainty: at the heart of each investment is a contractual promise to pay, secured by ring-fenced or identified assets which increases the certainty of payment.
  • Structural protection: low loan-to-value ratios, covenants protecting the lender's position and structures with built in excess collateral are some of the ways that secured finance investments can be structured to help protect investors from defaults.

Secured finance chart

Click herefor an explanation of how premiums for complexity and illiquidity drive returns in secured finance.

Why has secured finance got everyone talking?

Watch our video to hear Alex Veroude, Head of Credit and Deputy Head of Fixed Income (New York) and Gareth Mee, Executive Director, EMEIA Insurance, Ernst & Young discuss what makes Secured Finance so compelling for institutional investors.

In our opinion, an allocation to Insight's secured finance portfolio can help you in a number of ways:

  • Increase the return expectation of your credit allocation given the expected yield premium relative to traditional investment grade corporate credit markets.
  • Reduce the volatility of your credit or broader bond allocation given the diversification properties of these investments relative to other bonds.
  • Protect against the price impact of rising interest rates due to the floating-rate cashflows from the portfolio.
  • Help to create a reliable buffer between your short-term, liquid cashflow generating assets and your longer-term, growth generating assets.

Please note: with effect from 5 January 2018 we are no longer accepting subscriptions to IIFIG Secured Finance Fund. A combination of the Fund size and existing commitments will bring the fund to its target capacity. Investors with existing holdings are not affected and you can still sell your shares. We remain open to new segregated Secured Finance mandates with customised investment guidelines. Please contact your Insight relationship manager for further information.

Fixed income team in numbers

  • 112 Fixed income investment professionals globally
  • 17years Average experience of fixed income team
  • £124.1bn fixed income assets

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Team statistics as at 30 June 2018. Assets under management (AUM) are represented by the value of cash securities and other economic exposure managed for clients.

Important information

The value of investments and any income from them will fluctuate and is not guaranteed (this may be partly due to exchange rate fluctuations). Investors may not get back the full amount invested. Past performance is not a guide to future performance.

Derivatives may be used to generate returns as well as to reduce costs and/or the overall risk of the portfolio. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.

The investment manager may invest in instruments which can be difficult to sell when markets are stressed.

Investments in bonds are affected by interest rates and inflation trends which may affect the value of the portfolio.

A credit default swap (CDS) provides a measure of protection against defaults of debt issuers but there is no assurance their use will be effective or will have the desired result.

Where leverage is used through the use of swaps and other derivative instruments, this can increase the overall volatility. Any event that adversely affects the value of an investment would be magnified if leverage is employed by the portfolio and losses would be greater than if leverage were not employed.

This Fund meets the definition of a covered fund under Volcker regulations.

Any losses in the fund will be borne solely by investors in the fund and not by BNY Mellon (including its affiliates); therefore BNY Mellon's losses in the fund will be limited to losses attributable to the ownership interests in the fund held by BNY Mellon and any affiliate in its capacity as an investor in the fund or as beneficiary of a restricted profit interest held by BNY Mellon or any affiliate.

Ownership interests in the fund are not insured by the FDIC, are not deposits, obligations of, or endorsed or guaranteed in any way, by BNY Mellon. Neither BNY Mellon nor any of its controlled affiliates (which includes the fund's general manager/ managing partner/ investment adviser), may directly or indirectly, guarantee, assume, or otherwise insure the obligations or performance of the fund or of any other covered fund in which the fund invests.

Investors should read the fund's offering documents before investing in the fund. Information about the role of BNY Mellon, its controlled affiliates, and their employees in sponsoring or providing services to the fund are described in the Volcker Rule section of the offering documents.

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