Oliver Hamilton


“You need to look past where the money is flowing and instead look holistically at illiquid credit because relative value changes over time.” Oliver Hamilton, Townsend Group, an Aon company


does not make sense. There are some multi-asset illiquid funds out there, some of them are good but they are few and far between. Our philosophy is if you are accessing different illiquid credit strategies – and you have the funds and governance to do so – you should select the best manager to run each mandate. However, finding someone to do it all well, and in the right structure, is extremely difficult. Halfon: You not only want specialists to go out and find the right loans but specialists to go out and get the money back if there’s an issue. That default management layer is crucial. The other added value that these strategies provide is in how you reinvest the money. A lot of those loans are amortising quite fast but with some degree of uncertainty. You can have an eight-year maturity for a loan to a small-to-medium sized company but most of the capital may be amortised after four years. Aside from the coupon and the capital, you get cash coming from contributions and perhaps, for defined benefit schemes, from changes in asset allocation.


If you do not have that cash management specialisation, the cash-flow driven investment (CDI) strategy will not work as well as it should. It took us a bit of time to assess that originators working separately on the portfolio management aspects is not optimal because they each have a tendency to reinvest the money into their own area of expertise, so, for example, all the infrastructure money will go back to


October 2019 portfolio institutional roundtable: Private debt 13


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