Alternatives team
|Featured

European Credit Opportunities Strategy

Diversifying private-credit portfolio targeting double-digit returns and downside risk management

Strategy overview

Investment Approach
Direct origination of borrowers. Creation of bespoke financing solutions. Typically one-to-one negotiations to secure favourable lending terms negotiations to secure favourable lending terms.

Investment Opportunity
Exposure to an inefficient market aiming to provide a differentiated and alpha-rich proposition to investors

Investment Universe
Performing Western European non-sponsored, asset-rich companies seeking EUR5-15m flexible growth or other funding

Christophe Rust
Co-Head European Credit Opportunities
Lei Lei
Co-Head European Credit Opportunities, Alternatives

The role the strategy can play in portfolios

Exposure to a structural theme

Demand for private credit in Europe is growing as banks retreat from lending and small/mid-sized firms seek flexible financing solutions

Access to a 'sweet spot' in private debt

Non-sponsored borrowers are often under-served, located in small and medium-sized cities. Lenders who can structure bespoke and timely loans can command attractive terms

Improved risk/return profile

An emphasis on downside risk management and focus on non-sponsored loans (typically lower loan-to-value ratios and stronger lender protection) can improve risk-adjusted return potential

Portfolio diversification

With many more non-sponsor than sponsor-based borrowers, the opportunity set is larger and more diverse - by both sector and geography; correlations are relatively low

Investment Philosophy

01

An estimated EUR930bn funding gap in European corporate mid-market creates a rich hunting ground for private credit investors

02

To uncover opportunities in the non-sponsored market, managers should focus on overlooked origination channels - going off the beaten track

03

By sourcing off-market deals rather than partaking in competitive processes, lenders can command higher fees and better lending terms

04

Debt structuring expertise is vital for compelling risk-adjusted return outcomes and to allow a strong focus on downside risk management

Key facts

  • Asset Subclass

    Credit
  • Currency

    EUR
  • Team

    Alternatives team
  • Geographical Focus

    Developed Markets
  • ESG Classification

    ESG Integration

Why Ninety One for European Credit Opportunities Strategy

01

European team experienced in buildout of European credit platforms with EUR3 billion invested across two credit cycles and supported by a seasoned team

02

Dedicated originators securing deals in overlooked sourcing channels in small and mid-sized cities and off-market situations

03

Skilled in structuring flexibility, PE-style underwriting, workout skills, local transaction partners and post-funding borrower support

04

Offering a first-class operating platform with extensive European credit investment experience and a strategic commitment to alternative credit

Strategy Literature

Contact our client service teams.

Get in touch

Risks

Concentrated portfolio

The portfolio invests in a relatively small number of individual holdings. This may mean wider fluctuations in value than more broadly invested portfolios.

Currency Exchange

Changes in the relative values of different currencies may adversely affect the value of investments and any related income.

Default

There is a risk that the issuers of fixed income investments (e.g. bonds) may not be able to meet interest payments nor repay the money they have borrowed. The worse the credit quality of the issuer, the greater the risk of default and therefore investment loss.

Interest Rate

The value of fixed income investments (e.g. bonds) tends to decrease when interest rates rise.

The content of this website is made available for informational purposes only and should not be construed as an offer, marketing, solicitation or investment advice with respect to any investment products or services. The website has not been reviewed or approved by any regulatory authority and may contain information with respect to investments products that may not be registered in some jurisdictions.

Although we believe any information obtained from external sources to be reliable, we have not independently verified it, and we cannot guarantee its accuracy or completeness (ESG-related data is still at an early stage with considerable variation in estimates and disclosure across companies. Double counting is inherent in all aggregate carbon data).

Any decision to invest in the Strategy described should be made after reviewing the offering document and conducting such investigation as an investor deems necessary and consulting its own legal, accounting and tax advisors in order to make an independent determination of suitability and consequences of such an investment. This material does not purport to be a complete summary of all the risks associated with this Strategy. A description of risks associated with the Strategy can be found in the relevant offering or other disclosure documents where applicable. Copies of such documents are available upon request.

Additional information on our investment strategies not found here (ninetyone.com/-/media/documents/miscellaneous/91-further-information-en.pdf) may be provided on request.

For more information on our Ninety One ESG Classification, please click here