Rising interest rates and inflationary forecasts continue to underpin strong demand for Leveraged Loans, thanks in large part to their floating rate characteristics. Yet investors seeking to introduce dedicated exposure to this asset class can face significant implementation challenges.
Read more: Entering Leveraged Loans? Three Implementation Questions to Answer
When it comes to selecting and working with external asset managers, larger asset owners have a dual responsibility—says Majdi Chammas of Första AP-Fonden (AP1), one of Sweden’s four pension reserve funds with more than SEK 460 billion (USD 47 billion) in assets. “We should push the industry, not only to help our own fund,” he observes, “but to benefit other investors: smaller investors, for example, who do not have the capacity to push for change.
Read more: How AP1 is Driving Innovation in Manager Selection
Asset managers have moved en masse towards adopting Article 8 or 9 designations under the EU’s Sustainable Finance Disclosure Regulation (SFDR) framework, introducing new funds and repurposing existing ones. Although the initiative has improved overall levels of disclosure and encouraged managers to enhance sustainability practices, lingering ambiguity around regulatory definitions has created a new set of problems. Recent manager research indicates that a significant number of fund reclassifications could be required if more stringent standards were to come into effect.
Read more: One Year On, Have Sustainability Disclosure Regulations Brought Clarity or Confusion?
Although infrastructure is renowned as an inflation-sensitive asset class, the reality varies greatly depending on the strategy type and asset-level specifics. Not all ‘inflation-linkage’ is created equal, and not all ‘core’ assets are hardy cockroaches ready to survive the inflationary fallout.
Read more: Will Your Infrastructure Investments Withstand Inflation? The 700 Billion Dollar Question
Emerging Market Debt indices staged a significant drop in February. Active managers should have provided some protection against the damage—the average strategy was already underweight Russia at the start of this year. Yet many have faced headwinds, including high transaction costs when selling and losses caused by overweight positions to neighbouring countries.
Read more: Ukraine Impact: Are Active Managers Providing Protection in Emerging Market Debt?
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