Nikko Asset Management has launched customised Global TLAC (Total Loss-Absorbing Capacity) Bond fund dedicated to investing in TLAC bonds.
The fund is managed by London-based Global Fixed Income team and over €144m was raised in 2019 from Japanese insitutional investors, reflecting growing demand for higher yielding quality investment solutions.
Head portfolio manager of Global Credit, Holger Mertens said, "Investing always starts with an in-depth credit analysis. However, once the team gets comfortable with the credit quality of a bank we are willing to go down the capital structure of an issuer. The final investment decision depends very much on the premium offered by an issuer, we believe this is an area of the market where fundamental research is critical."
In November 2015, the Financial Stability Board issued the final minimum TLAC standard for global systematicallu important banks (G-Sibs). TLAC bond instruments are ranked between the issuer's traditional senior unsecured and its subordinated bonds. Their location within the mezzanine structure provided active investors the opportunity to earn a strong premium.