Legal & General Investment Management (LGIM) has launched a new short-term alternative finance fund in response to growing interest from investors.
The Luxembourg-based fund – which is being targeted at institutional investors including UK pension schemes – will invest in a portfolio of sub-one-year private credit assets, aiming to offer investors a strategic alternative to cash and other short-dated credit.
LGIM said the strategy would target attractive yields and low volatility, with an average investment grade rating.
Types of short-dated alternative finance the fund could invest in will include capital call facilities, supply chain finance, trade receivables and asset-backed financing.
The launch follows the launch of LGIM's first short-term alternative finance strategy in 2021, which now manages over £1bn on behalf of a range of clients.
All transactions for the fund are underwritten by LGIM's alternative debt investment team, led by Matthew Taylor, with Sam Jones acting as joint fund manager.
Taylor said: "We believe short-dated alternative finance can provide an attractive solution for enhanced returns in comparison to liquidity funds or holding cash. It achieves this with low duration and volatility helping investors to maintain sufficient liquidity with potentially reduced risk when compared to other alternatives."
LGIM head of private credit Nick Bamber added: "We're proud to have launched a second iteration of this fund and to open it up to investors. Our short-term strategy is a fast-growing area of our business, having deployed over £2bn since 2021. Having grown LGIM's footprint and product offering in continental Europe for several years, we believe this asset class offers attractive yields, low risk and with a strong pipeline ahead. This makes short term alternative finance a potentially attractive, strategic cash alternative for investors."
LGIM's new fund will sit on its newly-launched RAIF (reserved alternative investment fund) platform which has been launched to help boost the asset manager's European and global growth ambitions and help provide greater investor access to LGIM's private credit expertise.
