BNP AM

The sustainable investor for a changing world

Diversified Private Credit Strategy

Diversified private credit portfolios allow DB and DC pension schemes to access private market assets that would traditionally have been the preserve of banks. Encompassing direct lending to infrastructure projects, real estate projects and corporate entities such exposures can dampen portfolio volatility and enhance the overall risk/return profile of the pension scheme.

At BNPP AM, we believe a portfolio of secure private credit and real assets provides investors with a better match of liabilities as well as other tangible benefits that liquid strategies do not. The incremental benefits of a private credit approach can be summarised as follows:

  • Additional returns above gilts and investment grade credit
  • Cashflows backed by high quality collateral
  • Cashflows that provide inflation linkage, long-term cashflows
  • Highly covenanted, secure income streams
  • Limited market exposure, lower default rates
  • Improved overall portfolio sharpe ratios

BNPP AM’s Diversified Private Credit strategy leverages the specialist investment teams that comprise the Private Debt and Real Assets (PDRA) investment group of over 50 investment professionals, in addition to privileged access to the origination capabilities of the wider BNP Paribas Group. With origination teams focused on corporate lending, infrastructure debt and real estate across the globe. BNPP AM’s investment teams have privileged access to this pipeline. In addition, BNPP AM is able to structure loans with the bank to suit client portfolios e.g. converting typically short-dated, floating rate commercial real estate debt to long-dated fixed rate tranches.

BNPP AM’s approach to Diversified Private Credit relies on specialist investment teams accessing the underlying asset classes, namely Global Loans, SME Lending, US Mid-Market Lending, Structured Finance, Infrastructure Debt and Commercial Real Estate Debt. Each team offers a long-term track record in the technical under-writing of private credit with established networks of project sponsors offering sustainable origination, supplemented by proprietary BNP Paribas Group origination partners.

Resources

A practical guide to diversified private creditDiversified private credit solutions for DC pension schemesSustainability in private debt markets
Diversified private credit strategies can help investors to reduce portfolio volatility and target higher risk-adjusted returns.
 
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Defined contribution (DC) pension schemes can also benefit from exposure to private credit markets.
 
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Applying environmental, social and governance (ESG) criteria to private debt markets can help to mitigate risk and open up investment opportunities.
 
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Investments are subject to market fluctuations and the risks inherent in investments in securities. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay, the strategies described being in risk of capital loss. There is no guarantee that the performance objective will be achieved.