Union Investment launches CLO fund

collateralised loan obligations German asset manager Union Investment has launched a structured credit fund, a further sign of alternative credit gaining way in asset management.

The UniInstitutional Structured Credit fund is focused on collateralised loan obligations (CLOs) with an average rating of investment-grade level.

Aimed at institutional investors, the fund is the third in a range of structured credit funds from the asset manager, including the UniInstitutional Structured Credit High Yield funds, which focuses on assets with a lower credit rating.

In the current environment of low interest rates, structured credit products offer investors an opportunity to achieve additional return through complexity and illiquidity premiums, the firm said.

Barbara Pohlmann, portfolio manager, added: “Because they come with floating interest rates, structured credit products are largely immune to interest rate changes and are therefore particularly attractive investments in the current environment where we expect interest rates to gradually go up.”

The fund’s underlying loans are rated BBB or higher though there is some high yield exposure and the target is to outperform the 3-month Euribor by 2–3 percentage points on a medium to long-term basis.

Pohlmann said Union’s team of specialists was one of the biggest in Europe and managed assets of around €3 billion in total.

Earlier this year, French bank Natixis raised over €308 million for a CLO that is managed by its asset management arm. The bank said investors were revisiting these vehicles to manage credit risk and pursue yield.

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