Chorus Capital invests in the performing corporate loan portfolios of leading European and North American banks through risk-sharing transactions
European and North American banks are facing multiple, long-term challenges. Chief among those are increasing capital requirements and insufficient profitability, especially in Europe.
Risk-sharing transactions are an integral part of banks’ capital management toolkit. First developed in the mid-1990s, they have been used by many of Europe's largest banks for the past 20 years. Properly structured, they allow banks to recycle capital and free up credit lines to support new lending.
Risk-sharing represents a long-term, scalable investment opportunity to earn stable risk-adjusted returns (mostly through contractual income) from highly diversified, performing pools of loans. These assets have marginal, if any, correlation with the public credit markets.
- Focus on large corporate loan portfolios (Revolving Credit Facilities extended to primarily Investment Grade borrowers for relationship purposes)
- Senior-most exposures in the borrower's capital structure, with much higher recovery rates than other debt instruments
- High level of granularity and diversification across borrowers, sectors and countries
- No Non-Performing Loans
- Strong alignment of interest with the issuing bank through significant risk retention
- Low credit loss rates through cycles, notably during the Global Financial Crisis
- Capital preservation as demonstrated by our stress tests
- Marginal correlation to public credit markets
- No market risk in risk-sharing transactions
- Marginal bank counterparty risk mitigated through structural features
- Responsible Investment Policy adopted in March 2019
- All disclosed borrowers in our portfolios checked for ESG risks that may impact their credit profile
- Business Involvement Screening (BIS) to manage risk and generate stable returns
- A-rated ESG scores for all of our active funds
