Liquid Alternatives: Prime Capital Launches Liquid Alts Credit Fund

It is a new fund of funds that focuses on niche credit strategies.

Prime Capital’s Liquid Alternative Credit Fund, a new fund of funds, will invest in 15 to 20 underlying funds which are diversified globally and invest in alternative credit strategies such as trade finance and real estate bridge financing. Prime Capital AG manages €17.2bn of assets in various funds. (HedgeWeek)

The typical characteristics of liquid alternative credit are high cash yields, low correlation to the credit markets, low volatility, and very good risk hedging.

Further, due to its low duration, the asset class is quite independent of interest rate risks, and it is possible to diversify investments globally in various market segments.

Liquid Alternative Credit Fund

Tilo Wendorff, managing director of the Absolute Return team at Prime Capital, clarified the salient features of the new fund:

  • These strategies provide strategies similar to hedge funds
  • They provide advantageous liquidity in contrast to other forms of private debt
  • They have strong levels of tangible collateral (eg ~LTV of up to 60% in the Real Estate space)
  • At the same time, they provide attractive expected returns, mostly due to underlying complexities
  • The universe is very fragmented, investments are hard to source and managers have a low level of institutionalization
  • The individual funds require a very targeted and carefully coordinated selection
  • Three seed investors have subscribed to an initial seed capital of about US$30 million
  • The fund targets an annual net return of 7-9%; volatility of about 2%
  • It is structured in the form of a Luxembourg SICAV-RAIF
  • Management fee of 0.5% per annum plus a performance fee
  • The fund is open only to professional investors, not retail.

Ideal for institutional investors looking for alternatives

“Our PCAM Liquid Alternative Credit offers institutional investors efficient access to a broad and robust strategy mix with clear return targets,” said Dr. Werner Goricki, board member and CIO. “It makes a universe of small niche managers and strategies investable which would otherwise be very hard to invest.”

“PCAM Liquid Alternative Credit is, therefore, suitable for stabilizing and diversifying portfolios with the very low beta to the traditional credit market,’ Goricki added. “The fund is another example of our many years of successful expertise in putting together risk-return-optimized portfolios with alternative investments.”

Related Story:     Real Assets Investing Through REITs

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