With UniInstitutional Structured Credit, Union Investment has launched securitization fund for institutional investors with a focus on collateralised loan obligations (CLOs) and investment grade averages.
The new institutional mutual fund completes the product offering in this area, consisting of the UniInstitutional Short Term Credit and the UniInstitutional Structured Credit High Yield. While the former invests exclusively in investment grade positions, the latter focuses on lower rated securities.
In today’s low interest rate environment, securitization offers investors the opportunity to earn more in the form of complexity and illiquidity premiums. At the same time, dependence on the traditional capital markets is low. “Due to their variable interest rates, securitizations are largely immune to changes in interest rates and are thus suitable as an investment, especially against the background of slightly higher interest rates,” said portfolio manager Barbara Pohlmann.
UniInstitutional Structured Credit invests in a portfolio of securitizations with a focus on corporate lending securitization (CLO), broadly diversified by country and type of securitization. The fund offers investors access to otherwise hardly directly investable types of loans. Depending on the respective market situation, about 20% of the fund’s assets are invested in fixed-income or floating-rate securities such as corporate bonds or highly liquid ABS positions. The average rating at the overall fund level is at least BBB- in the investment grade range.
The aim of the new fund is to achieve a return of two to three percentage points over the medium to long term compared to the 3-month Euribor. Price differences between individual markets and types of credit are also exploited.