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Alternative credit – no time like the present

Investments
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July 14, 2020

We believe now is a good time to diversify into alternative credit

2020 has been an unprecedented year and the outlook remains uncertain from here. Many investors are considering the resilience of their portfolio in this environment.

Over April, asset classes diverged, changing the value on offer in each; equities and investment grade bonds have priced in a quick recovery while alternative credit markets seem more cautious.

Alternative credit has experienced only 60% of the drawdown in equities

Alternative credit has held up relatively well in the recent market volatility, experiencing only 60% of the drawdown in equities. We believe alternative credit is a valuable diversifier to equity and investment grade bonds, accessing compelling sources of return outside of corporate balance sheets, e.g. consumer lending, emerging markets and illiquidity premia. A well-diversified alternative credit portfolio should experience much fewer defaults. Building this is not easy though, and investors may need to consider the trade-off in building a diversified credit portfolio, versus timeliness in accessing dislocations and opportunities.

So what should investors be thinking about? Read the below paper to find out.

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