Alternative Credit Fund launched

London CIV is pleased to announce the launch of its Alternative Credit Fund. The Sub-fund was launched this month with three seed investors. Initial Assets Under Management (“AuM”) for the Sub-fund is £398m.  

The Sub-fund’s objective is to seek a return of SONIA +4.5%, net of fees, which it is expected to achieve by investing in securitised assets, loans, high yield corporate bonds, and convertible bonds and, in addition, investment grade corporate and government bonds. The Sub-fund will seek exposure to these assets either indirectly or directly.  

Indirect exposure to these assets will be accomplished by investing the Sub-fund solely in the CQS Credit Multi-Asset Fund, an alternative investment fund, authorised by the Central Bank of Ireland. The underlying investment manager (CQS), which has been appointed by London CIV, aims to deliver stable returns while optimising yield within the sub-Investment Grade credit market. A key focus within sub-Investment Grade are floating interest rate credit instruments within the senior secured loans market and asset backed securities (“ABS"), which is expected to result in lower interest rate sensitivity for the overall portfolio.  

The London CIV have been working closely with CQS in ways to improve its environmental, social and governance (“ESG”) processes which has led to the underlying CQS strategy being classified as Article 8 under the Sustainable Financial Disclosure Regulation (“SFDR”) which means it promotes ESG characteristics. Furthermore, London CIV were pleased that CQS has become a signatory to the Net Zero Asset Managers’ Initiative and they are currently in the process of setting interim targets to achieve net zero by 2050.

Mike O’Donnell, CEO of London CIV said: “I am very pleased we have launched the Alternative Credit Fund as it will play a part in meeting our own ambitious net zero targets, and those of the investors in this Sub-fund.

“CQS have recently joined the Net Zero Asset Managers Initiative and have confirmed that the Credit Multi Asset Fund is classified as an ‘Article 8 Fund’ under the Sustainable Finance Disclosure Regulation which means that the CMA is a fund which promotes environmental and social issues.

“The ACF will also support London CIV’s duty as investors to finance the low-carbon transition. Reducing climate change risk is a key priority for Client Funds, many of whom have already set their own net zero targets and this Sub-fund will support them in delivering these objectives. Its other main objective is to achieve a return of SONIA +4.5%.”

Soraya Chabarek, Co-CEO of CQS said: We are delighted to be part of London CIV’s expanding suite of offerings. The Alternative Credit Fund marks another fantastic achievement for CQS and it is an honour to deepen our partnership with London CIV and the UK LGPS community. We have a long and established relationship with London CIV who has been at the forefront of alternative credit investing; our shared vision and drive toward sustainable income led investment solutions will provide the underlying Partner funds a valuable tool as they seek to achieve their long-term investment objectives.”

[1] SONIA is the Sterling Overnight Index Average interest rate which is run by The Bank of England. It is the risk-free rate for sterling markets.