Credit risk sharing strategy
In the wake of the global financial crisis of 2007-2009, the credit risk sharing (CRS) market has expanded significantly, spurred by new banking regulation. For banks, CRS has become a strategic tool, permitting them to extend their financing capacity while helping to drive broader economic activity. And for investors, CRS can provide difficult-to-access exposure to banks’ core lending portfolios, which can help to enhance risk-adjusted return potential and increase diversification.
Investment philosophy
The team seeks to generate illiquidity and complexity premia by primarily investing in CRS, including corporate and SME1 lending as well as leasing, issued by European banks. In doing so, it integrates ESG2 criteria into investment decisions, working closely with BNP Paribas Asset Management’s dedicated Sustainability Centre.
Investment process
The strategy follows a rigorous investment process that involves:
- Multi-channel sourcing
- Pre-screening of investments based on portfolio and structure characteristics
- In-depth due diligence
Team and expertise
Based in Paris, the CRS team is led by industry veteran Michel Fryszman, 34+ years of industry experience. It is made up of experienced professionals with an in-depth knowledge of banking regulations, structured finance, and corporate lending.3
The team is fully integrated within BNP Paribas’ 100+ strong Private Assets group and enjoys the support of various BNP Paribas Asset Management teams including our dedicated Sustainability Centre, Quantitative Research Group, Macro Research team, and the wider BNP Paribas network.
[1] SME: Small and Medium Enterprises
[2] ESG: Environmental, Social and Governance. ESG assessments are based on BNP Paribas Asset Management’s proprietary methodology which integrates all three aspects of E, S & G.
[3] BNP Paribas Asset Management, as of 30 September 2024
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Investments are subject to market fluctuations and the risks inherent in investments in securities. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial investment. There is no guarantee that the performance objective will be achieved.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Environmental, social and governance (ESG) investment risk: The lack of common or harmonised definitions and labels integrating ESG and sustainability criteria at EU level may result in different approaches by managers when setting ESG objectives. This also means that it may be difficult to compare strategies integrating ESG and sustainability criteria to the extent that the selection and weightings applied to select investments may be based on metrics that may share the same name but have different underlying meanings. In evaluating a security based on the ESG and sustainability criteria, the Investment Manager may also use data sources provided by external ESG research providers. Given the evolving nature of ESG, these data sources may for the time being be incomplete, inaccurate or unavailable. Applying responsible business conduct standards in the investment process may lead to the exclusion of securities of certain issuers. Consequently, (the Sub-Fund’s) performance may at times be better or worse than the performance of relatable funds that do not apply such standards.
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