@Challenger IM.
Investment grade corporate credit traditionally plays a core role in investors’ portfolios. However, as compensation for credit risk has dropped to historically low levels, it is prudent to ask if a significant allocation continues to offer a strong risk-return profile or if there are ways to enhance the credit spread component. At Challenger Investment Management, we explore how securitised credit offers an attractive alternative - providing higher spreads for comparable ratings, shorter credit duration, and enhanced defensive characteristics.
For institutional insurance investors, these features translate into reduced return volatility, improved capital efficiency, and better alignment with long-term liability structures. Portfolios can be constructed to meet specific regulatory and solvency requirements, making them well-suited to insurance balance sheets. When matched with the right capital framework and portfolio objectives, securitised credit has delivered robust performance.
However, navigating this complex asset class requires deep expertise. Experienced managers play a critical role in underwriting, structuring, and managing these investments and portfolios to ensure they meet regulatory, capital, and risk requirements.
In our latest article, we delve deeper into the structural advantages of securitised credit and its role in building resilient insurance portfolios.
