Alternative investments span a broad range of non-traditional asset classes, such as private debt and real assets. Once seen as a niche area, they have risen to a place of prominence in many portfolios over the last decade, particularly in the ongoing search for yield. BNP Paribas Asset Management (BNPP AM) has an extensive track record in the alternatives space, extending back to 2006, and today boasts a dedicated team of over 50 professionals that manage around €9 billion of assets*.
In today’s global investment environment where equities remain volatile and sovereign bond yields in low or negative territory, investors – in particular insurance companies and pension providers – have found meeting their investment goals challenging.
Alternative investments offer a solution. With the help of an experienced investment manager, they can provide a sustainable income stream and diversification.
At BNPP AM, we focus on what we believe are three of the most attractive areas of the alternatives market: corporate loans, real assets and structured finance.
Corporate loans represent a large and diverse investment opportunity set. Those issued by larger companies are typically floating rate instruments, which can help to mitigate interest risk given that they will pay higher yields if prevailing rates rise. Loans issued by medium and small-sized businesses often have strong covenant packages and, owing to the size of their business operations, are potentially well insulated from the impact of adverse macro events.
Real assets cover infrastructure and commercial real estate debt, which gives investors’ exposure to large physical assets such as airports, roads and buildings. Given the nature of the underlying projects which are being financed, real assets can offer stable income over a long-term horizon, and are regarded as secure investments due to the physical collateral involved. The longer-term nature of the debt also means investors can earn an illiquidity premium compared to similarly rated corporate bonds.
Structured finance refers to asset-backed securities (ABS), cash-flow generating assets that are linked to a large pool of smaller loans, such as credit cards and mortgages. Their performance is more closely tied to credit and real estate fundamentals, as opposed to corporate balance sheet health, meaning they can offer stable return potential, as well as diversification from traditional asset classes like equities and corporate credit.
Our alternatives investments are powered by our Private Debt and Real Assets (PDRA) platform, which seeks to offer innovative solutions across corporate loans, infrastructure and real estate debt, and structured finance.
Underpinning our platform are several key features that we believe are key to building value for investors:
- A comprehensive approach to credit, covering multiple stages from selection, valuation, monitoring to structuring
- Unique access to BNP Paribas’ global financing franchise that dates back over 150 years
- Full environmental, social and governance (ESG) integration in our investment process
We are able to offer fully-customisable solutions across our three areas of alternatives expertise.
|Corporate loans||Real assets||Structured finance|
Middle market loans
Small and medium enteprise (SME) lending
|Real estate debt|
|Asset backed securities (ABS)|
Mortgage backed securities (MBS)
Collateralized loan obligations (CLOs)
*Source: BNPP AM, December 2019.
- Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This material does not constitute investment advice.
- Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
- Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.