The credit investment field has been growing exponentially in recent years, as global monetary policy forces investors to seek out higher yields and diverse investment opportunities. These opportunities include structured credit, asset-backed loans, and nonperforming loan pools. Credit investment professionals need specialized skills to navigate the fast-moving market. They should seek a partner that understands the ins and outs of corporate credit offerings, and can employ proven strategies to help them identify attractive credit investments.
Credit investments are usually part of a well-diversified portfolio, and can help balance risks throughout the portfolio. They are commonly used by bondholders, but can be used by investors for other purposes, such as defensive assets. In addition, investors may be already using credit investing to reduce their exposure to risk in other areas of their portfolio.
Credit investment is an important part of bond investing, accounting for $13 trillion in global fixed income. By allocating some of your assets to these assets, you can boost return potential, diversify your portfolio, and generate income. The credit market encompasses a variety of categories, including government bonds, corporate bonds, and bonds issued by emerging market nations. The risk level of each category can vary significantly. However, if you can manage the risks and understand the benefits, it could be an excellent investment strategy.
The risks associated with structured credit products can be managed through the use of securitization. This method of investing in credit can provide investors with higher returns while diversifying their portfolios and tailoring their credit risk exposures. A securitized mortgage agreement, for example, can become part of a pool that consolidates multiple loans. Instead of paying a fixed rate, investors receive a payoff that is directly related to the performance of the underlying asset.