As growth in developed economies slows and restrictive monetary policy rates start to bite, investors looking to alternative markets for portfolio diversification and attractive returns could well consider a relatively young, little-known, but high-quality asset class: household loans.
Loans to relatively high-income households in the US, Europe and potentially in Asia tend to exhibit low mark-to-market volatility and low defaults and come with a comparatively high coupon that helps absorb losses. Other characteristics of the loans, typically made to creditworthy earners to consolidate debt into a single, cheaper loan, include a 3-5 year maturity and full amortisation.
Tonko Gast, founder and CEO of Dynamic Credit Group and Portfolio Manager, discusses the asset class with Co-Head of the Investment Insights Centre Andrew Craig on this Talking Heads podcast.
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