Union Investment Launches New Multi-Credit Fund

Mar 25 2017 | 2:09am ET

Frankfurt-based institutional asset manager Union Investment has reportedly launched a new multi-credit fund aimed at combatting the current low-yield environment. 

The new fund, named UniInstitutional Multi Credit fund, is domiciled in Luxembourg and was formally launched last week, according to an article in Citywire. It will invest in standard coupon bonds and floating rate securities across the capital structure, including subordinated debt, financial bonds, CoCos, convertibles, covered bonds and structured credits. 

However, the fund’s portfolio will carry a minimum average rating of investment grade and a minimum of B− for individual securities at the time of purchase, the article continued. Overall, the fund’s annual investment return objective is gross 2.5-3 percentage points above the 3-month Euribor rate. It is designed to serve as an alternative for medium-term to long-term investments for proprietary account investments.

The new vehicle is aimed at an institutional audience and will best suit investors seeking to diversify their current fixed-income exposure with a medium- to long-term alternative that is managed outside the constraints of a benchmark, Union Investment added. 

“An investment rethink is required in the current capital market situation,” the company said in a statement to Citywire. “In our estimation, the environment of low interest rates will persist in the medium to long term and even negative returns are now ubiquitous. It will therefore become all the more important to actively manage portfolios in a way that optimizes investment gains and presents the opportunity for higher returns.’

Union Investment Group was founded in 1956 as the investment arm of Germany’s banking cooperative, a consortium of credit unions, savings banks and local financial services firms. The company serves more than four million customers and managed €262 billion at the end of 2016.

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