Asia-focused alternative investment firm PAG has closed its third fund investing in Significant Risk Transfer (SRT) deals after raising $1.25 billion from investors seeking greater exposure to bank loan books.
By transferring the risk of loss on a loan or loan portfolio to an investor, banks can reduce the capital they must hold on their balance sheets against that exposure, enabling them to redeploy that capital elsewhere, potentially in another loan or a return to shareholders in the form of a dividend.
In return, investors gain access to stable cash flows generated by high-quality performing loan portfolios that typically offer returns uncorrelated with other investments in their portfolios.
PAG’s London-based SRT team began investing in the sector in 2016 and currently manages over $4 billion in SRT investments.
“We expect the SRT market to grow at a rate of 30-40 percent per annum in the coming years as more banks adopt SRT and additional jurisdictions provide approval for SRT transactions,” James Parsons, head of the PAG SRT team, said in a statement.
Reuters
