NN IP: Investors eye alternative credit to mitigate rate hike effects
More than one third of institutional investors are planning to increase their exposure to alternative credit if interest rates continue to rise, according to a survey conducted by NN IP.
The survey, conducted among 100 institutional investors, revealed that a vast majority of 94% expect a Fed rate hike over the next twelve months, more than half of respondents believe that US rates will be hiked by at least 0.5%. Moreover, 69% of investors believe that the ECB’s QE programme will end in 2019, with ECB rates also gradually set to increase.
Consequently, those respondents who are already invested in alternative credit (45%) expect to increase their exposure over the next twelve months while 14% of respondents plan to invest in alternative credit for the first time.
Yet the survey also revealed that investors perceive alternative credit as a complex asset class, with only a third of respondents confirming that they were fully aware of the opportunities in alternative credit.
Moreover, one in five investors (20%) say the biggest obstacles to investing in alternative credit is understanding the return vs risk dynamic of opportunities involved, while 14% of participants say it is their risk department’s ability to understand the asset class and 11% said that they faced similar difficulties with their management boards.