Role of Liquid Credit
Liquid credit provides an income-driven return stream that offers a spread premium above government bonds, and also creates diversification benefits relative to equities. Credit investments are senior to equity in a company or entity’s capital stack, so we generally expect lower volatility and more stable returns than for equities, though the volatility of credit portfolios may increase during stress periods. We search for opportunities in credit markets which provide relatively high yields relative to expected losses from defaults, or where potential for price appreciation may lead to attractive total returns.
The liquid credit asset class includes investments in corporate credit across investment grade bonds, high yield bonds and leveraged loans; structured credit, including residential and commercial mortgage-backed securities, collateralised loan obligations, and asset-backed securities; emerging market corporate and sovereign debt; and niche areas of short duration credit such as specialty finance and consumer lending strategies.
