THE NETHERLANDS - ABP is in the throes of planning a high alpha fund, which will invest in areas like Asian credit, distressed debt, or CDO mezzanine tranches.
“We are looking at things we don’t contemplate doing ourselves that are possible sources for additional alpha,” said Pieter Prins, portfolio manager at ABP.
“We are thinking of things like Asian credit, distressed debt or CDO mezzanine. Another one is emerging markets or very active global bond management.”
ABP plans to outsource the management.
“For example, in emerging markets you want to have expertise on the ground and have a network of experts, with offices in all these countries,” explained Prins. “We simply don’t have the expertise and will never have.
These managers would have an additional advantage.”
Another area ABP is planning to beef up is US bank loans or leveraged loan investment, which it already invests in, but wants to expand. The advantage of these kinds of investments is that “they are defensive in nature; they are not as volatile and they have better covenants or protection for the investor than, say, high yield bonds in Europe”.
ABP has already been proactive in broadening the scope of its credit investments.
It set up a dedicated team in New York, with a team of credit analysts and portfolio managers in different sectors, and it has outsourced in areas where it is considered there is a difficulty in adding value inhouse.
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