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.