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.

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.

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.

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

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.

Fixed income team in numbers

  • 106 Fixed income investment professionals support the team
  • 17years Average experience of fixed income team
  • £121.1bn fixed income assets

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Team statistics as at 30 September 2017. Assets under management (AUM) are represented by the value of cash securities and other economic exposure managed for clients. 

Please note: 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.

Important information

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.

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