Our approach to structured finance

Working in partnership with clients, we structure bespoke deals across a variety of asset classes to deliver required outcomes. These include risk mitigation and tailored structuring for needs such as matching-adjustment eligibility. Deals may include CLOs, aviation, trade finance, swap repacks, guaranteed loans and other structured assets with a broad range of credit ratings and tenors, through GBP, EUR and USD-denominated transactions.

The strength and depth of our credit research team is leveraged to provide robust governance and we follow a disciplined investment process that incorporates, but is not bound by, environmental, social and governance criteria. Many trades enable us to use underlying assets as collateral (e.g. aircraft or real estate) for greater security against transaction risks. Our expertise includes actuarial and derivatives pricing with strong risk controls for pension schemes and insurance clients.

Our investment philosophy is focused on managing the downside, given the asymmetric risk profile of debt investing. As such, we lend against well-structured assets with security over the underlying assets and/or cashflows. We place high value on financial covenants, and avoid highly subordinated debt positions. We take the view that persistent excess returns come via excellent deal sourcing, not extra risk. We therefore avoid the higher risk parts of the credit spectrum, and instead focus on sourcing attractive deals the broader market may not see. We also embrace newer sectors and structures that may offer ‘complexity’ or ‘novelty’ premia.

Potential benefits of structured finance

Clarity for investors seeking long-dated cash flows.

Bespoke structuring

Specially-adapted structures can help investments meet defined cash-flow and eligibility criteria.

Risk mitigation

With strong risk controls in place for pension schemes and insurance clients, we frequently use underlying assets as collateral, helping improve recovery rates in the event of default.

Diversification

Historic performance shows diversification benefits versus liquid market opportunities.

Illiquidity premium

The illiquid nature of the assets typically commands a premium over comparable listed credit.

Key risks of structured finance

Investment risk

The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested.

Illiquidity risk

Certain assets could, by nature, be hard to value or to sell at a desired time or at a price considered to be fair (especially in large quantities), and as a result their prices could be very volatile.

Market risk

Changing market dynamics may undermine the relative attractiveness of structured transactions.

Complexity risk

Assessing risk implications of multi-layered transactions is challenging.

Structured finance team

  • Munawer Shafi

    Head of Structured Finance & Private Debt

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