Prudential M&G is developing a bespoke structured credit investment offering for institutional investors and has hired William Nicoll, head of European credit at Henderson Global Investors, to run the business. Investment bankers are already approaching large pension funds with structured solutions, but Pru M&G officials said it appears to be the first asset manager to do so.
The structured credit offering is being expanded in response to growing investor demand for products tailored to their specific risk and return requirements, said Pam Burgess, head of the institutional group, to whom Nicoll will report. The new group is separate from the existing eight-strong collateralized debt obligation team run by Dagmar Kent Kershaw.
“Investment banks can arrange and structure products, but pension funds are keen for the resulting portfolio to be managed in an ongoing fashion by an asset manager with the right expertise,” said Kent Kershaw.
A portfolio of leveraged loans with a duration overlay is one example of the kind of non-CDO structured product the new group could offer, said Burgess. For example, an investor might wish to extend the duration of a leveraged loan portfolio with a five-year average maturity to 10 years. It could do this by selling two-year interest rate swaps and buying 10-year swaps, thereby artificially extending the duration. The structured product offering would include both the leveraged loans and the derivatives.
Separately, Pru M&G has hired Mike Nicholson, director in the CDO team at Standard & Poor’s in London, to structure and manage portfolios for the CDO team headed by Kent Kershaw.
Nicoll is due to start in October and could not be reached for comment. Pru M&G, which is unrelated to The Prudential Corporation in the U.S., runs £55.4 billion of fixed income assets in Europe and the U.K.