Aegon AM launches insurance-backed private credit fund for institutional investors

Aegon Asset Management has introduced an evergreen private credit fund that utilizes insurance policies from top-rated insurers to reduce the risk of borrowers defaulting, targeting institutional investors in the UK and Europe, as reported by CityWire. The Aegon Insured Credit Fund provides investors with exposure to Aegon AM's existing insured credit strategy via a Luxembourg-domiciled Reserved Alternative Investment Fund (RAIF).

The fund invests in private credit on a global scale, with all underlying loans fully insured by insurers holding A or AA ratings. The insurance structure aims to transfer most of the credit risk from the borrower to the insurer, who would pay out in case of default. This approach is intended to provide institutional investors with a potentially lower-risk entry point into private credit, although the insurance does incur a cost.

Insurers charge premiums based on their evaluation of the underlying credit risk, and they may be less inclined to provide coverage for higher-risk loans. According to Aegon AM, the fund's liquidity arrangements have been structured to mirror the characteristics of its underlying portfolio. The strategy also includes analysis of environmental, social, and governance factors.

As of 30 June, the underlying insured credit strategy had achieved a gross yield of euro swaps plus 215 basis points. The fund is overseen by a dedicated team based in the Netherlands and UK, supported by Aegon AM's global research and responsible investment teams.