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Working with a partner that has in-depth knowledge of these pri- vate markets enables investors to create portfolios that are remark- ably versatile, can flex to changing liability profiles and provide closely matching cash-flows over time. This means defined benefit and defined contribution investors can allocate to private markets and see how the returns, which often beat those earned in public markets, can boost funding levels and individual member savings.
Seeing your impact For investors seeking more than a simple financial return on their capital, private credit markets provide great scope to boost envi- ronmental, social and governance (ESG) portfolio characteristics. Not only is there a broader opportunity set than in public markets, but the nature of security selection (i.e. primary transaction origi- nation) enables managers to embed an ESG process from the beginning.
As ESG is integrated in everything we do, BNP Paribas Asset Man- agement employs it from the selection phase onwards. Our propri- etary research and scoring methodology assesses ESG risk and best practice, while we carefully quiz each prospective company or borrower. Our internal models and taxonomies help us identify where investor capital could be best deployed to improve our cor- porate stance toward promoting sustainability.
By working closely with borrowers to structure credit agreements, rather than basing interest rates on market forces, managers can also ensure reasonable contracts are in place, and thereby monitor and manage credit risk. This helps produce reliable returns for investors (as reflected by lower default rates) and a contribution to their ESG score. Working in these markets also enables investors to inject capital into the real economy where it can get to work quickly. This helps to create sustainable local markets, adding stability to surrounding communities.
The sky’s the limit For investors who are seeking to allocate their capital to projects that use the United Nations’ Sustainable Development Goals (SDGs) as a lens, private credit markets are an ideal starting point. From social housing to infrastructure that will facilitate the energy transition; creating vital transport hubs, lending to small and medium-sized enterprises (SMEs) in the UK to upgrading outdated real estate – private credit can help investors to make a real, positive impact around the world. With innovation that can embed sustainability into the fabric of a security, we are aiming to make private markets a clear destination for investors who want bespoke solutions created through an ESG or SDG lens – and help them better match their liability goals.
BNP PARIBAS ASSET MANAGEMENT UK Limited, “the investment management company”, is authorised and regulated by the Financial Conduct Authority. Registered in England No: 02474627, registered office: 5 Aldermanbury Square, London, England, EC2V 7BP, United Kingdom. This material is issued and has been prepared by the investment management company. This material is produced for information purposes only and does not constitute: 1. an offer to buy nor a solicitation to sell, nor shall it form the basis of or be relied upon in connection with any contract or commitment whatsoever or 2. investment advice. Opinions included in this material constitute the judg- ment of the investment management company at the time specified and may be subject to change without notice. The investment management company is not obliged to update or alter the information or opinions contained within this material. Investors should consult their own legal and tax advisors in respect of legal, accounting, domicile and tax advice prior to investing in the financial instrument(s) in order to make an independent determination of the suitability and consequences of an investment therein, if permitted. Please note that different types of investments, if contained within this material, involve varying degrees of risk and there can be no assurance that any specific investment may either be suitable, appropriate or profitable for an investor’s investment portfolio. Given the economic and market risks, there can be no assurance that the financial instrument(s) will achieve its/their investment objectives. Returns may be affected by, amongst other things, investment strategies or objectives of the financial instrument(s) and material market and economic conditions, including interest rates, market terms and general market conditions. The different strategies applied to the financial instruments may have a significant effect on the results portrayed in this material. This document is directed only at person(s) who have professional experience in matters relating to investments (“relevant persons”). Any investment or investment activity to which this document relates is available only to and will be engaged in only with Professional Clients as defined in the rules of the Financial Conduct Authority. Any person who is not a relevant person should not act or rely on this document or any of its contents. All information referred to in the present document is available on
www.bnpparibas-am.com
March 2020 portfolio institutional roundtable: Fixed income
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