More than eight out of ten (86%) institutional investors and wealth managers will increase their allocations to multi-asset credit (MAC) strategies over the next two years in pursuit of a reliable and diversified source of income.
New research from Aeon Investments, the London-based credit-focused investment company, with pension funds, insurance asset managers, family offices and wealth managers who collectively manage around $545 billion, finds 62% will slightly increase allocations to MAC strategies, while 24% will make dramatic increases between now and 2025.
Nearly all (96%) respondents agree that MAC strategies diversify portfolios away from traditional fixed income asset classes such as corporate and government bonds, with more than a third (37%) strongly agreeing.
In terms of the key benefits that MAC strategies offer, more than two-fifths (43%) say optimal investment outcome through the economic cycle is the most important. More than a third (37%) picked superior risk-adjusted returns from MAC versus standalone credit strategies as the most important benefit. 12% say active management and tactical rotation across diversified credit assets is the most important benefit, while 6% say it is that MAC strategies are better positioned to capitalise on relative value, short-term mispricing and dislocations.
When asked their preference for MAC investing, 43% of investors chose a single manager offering a well-diversified MAC strategy. One third (32%) preferred a multi manager through third party Fund of Funds; one fifth (21%) say bespoke mandate (or segregated account) based on own risk and return requirements is the most appropriate; and just 5% employ specialist managers for each strategy.
Khalid Khan, Head of Portfolio Management, Aeon Investments said: “Multi-asset credit strategies offer a multitude of benefits for investors. In addition to providing important portfolio diversification, they also give the opportunity for superior returns irrespective of the market environment.
“The level of innovation in the MAC sector is increasing dramatically, with more strategies available to professional investors. This is leading to an increase in allocations.”
Aeon Investments is focused on delivering long-term superior risk-adjusted returns, through stand-alone investments that provide its investors access to key economic sectors. This is achieved by minimising downside risks to ensure capital preservation, and by designing a structure which prioritises alignment of interests.
It employs a research-driven investment approach and use a combination of qualitative and quantitative techniques. Idea generation and its due diligence process are based on a top-down approach, considering economic, credit and industry cycles, to identify inefficient markets and pricing dislocations.
At the portfolio level, Aeon Investments utilises a bottom-up approach, employing a rigorous due diligence process to assess the intrinsic value of the underlying collateral or credit, manage risk, and ultimately maximise return potential for investors.
This structural, statistical, and fundamental approach gives us a deep understanding of risk, which allows Aeon Investments to mitigate and structure for idiosyncratic and systemic risk during portfolio construction, and for the duration of the investment.
