EUROPE - Fixed income asset managers are changing their investment strategies and product offerings in response to ongoing credit market dislocations, a Fitch Ratings report says.
It said solid credit selection competencies were increasingly valued - particularly since the credit environment is likely to remain extremely challenging with reliance on historical default and recovery assumptions deemed particularly problematic.
Fitch said it also expected new investment offerings backed by credit products to be simpler, more transparent and un-leveraged. It said emphasis was likely to be put on assets of sustainable good credit quality and noted investors still seem reluctant at this stage to re-invest in asset- or mortgage-backed securities.
Fitch Ratings head of European fund and asset manager rating group Aymeric Poizot said: "We expect new inflows from pension funds and insurance companies rather than leveraged bank-funded investors, who have left the market.
"These institutional investors, who have lower marked-to-market sensitivity and longer-term investment horizons, are more likely to increase their tactical allocation to credit assets and Fitch understands that some institutional investors are considering such a move."
Fitch Ratings European fund and asset manager rating group senior director Manuel Arrive added: "Credit asset managers currently face the challenge of adjusting or even re-building their credit management organisations, and of adapting their investment strategies, resources and infrastructure in order to exploit a rapidly changing credit market paradigm, which is a necessary condition for their long-term business viability."
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