Aegon Asset Management has launched an evergreen private credit fund that uses insurance policies from highly rated insurers to provide additional protection against borrower defaults, targeting institutional investors in the UK and Europe, according to a report by CityWire.
The Aegon Insured Credit Fund gives investors access to Aegon AM’s existing insured credit strategy through a Luxembourg-domiciled Reserved Alternative Investment Fund (RAIF).
The vehicle invests in private credit globally, with the underlying loans fully insured by insurers carrying A or AA ratings. The insurance structure is designed to transfer much of the credit risk from the underlying borrower to the insurer, which is expected to make payments if a borrower defaults.
The approach is intended to offer institutional investors a potentially lower-risk route into private credit, although the insurance comes at a cost. Insurers charge premiums based on their assessment of the underlying credit risk and may be less willing to provide cover for higher-risk loans.
Aegon AM said the fund’s liquidity arrangements have been designed to reflect the characteristics of its underlying portfolio. The strategy also incorporates environmental, social and governance analysis.
The underlying insured credit strategy had generated a gross yield of euro swaps plus 215 basis points as of 30 June, according to Aegon AM. The firm said the strategy had experienced no credit losses or negative credit migration at that date.
The portfolio is managed by a specialist team operating across the Netherlands and UK, with support from Aegon AM’s global research and responsible investment teams.
