Credit Fund

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Credit Fund ( German  credit fund ) is a mutual fund whose investment fund mainly of loans (about agricultural loans , mortgage loans , ship or corporate finance ), microfinance funds or securitization (such as collateralized debt obligations comprised).

General

As with any mutual fund, risk diversification plays a major role in credit funds , so financial risks such as general credit risk , cluster risk and granularity are of considerable importance for the composition of the fund. In July 2007, for example, the hedge fund " Bear Stearns High-Grade Structured Credit Fund" got into trouble with a leverage of 10: 1 because its portfolio consisted mainly of subprime mortgage loans that were in a subprime crisis . In October 2008, the Millennium Global Emerging Credit Fund, which had credit risks in emerging markets , got into trouble . Problem was not with him the high leverage , but that the broker (the security deposit requirements English margins ) on the debt not drastically increased and the fund's positions more than security ( English collateral accepted).

properties

Like all funds, credit funds must pursue an asset allocation in order to optimize the risk-adjusted return . As accumulation funds, credit funds usually have no distributions , rather the realization of returns takes place via periodic cash flows or the sale of assets, there are default risks , especially with credit portfolios , the correlation with stock or bond markets is low. The investment horizon is medium to long-term, the liquidity has to follow the UCITS 3 rules. Loan funds can hedge their financial risks through hedging transactions.

Legal issues

As alternative investment funds (AIF), credit funds are subject to the provisions of the Capital Investment Code (KAGB). According to a circular from BaFin , capital management companies are also allowed to grant money loans, provided this is done in the context of portfolio management . AIF capital management companies may only grant a money loan within the collective asset management if this is based on Regulation (EU) No. 345/2013, Regulation (EU) No. 346/2013, Regulation (EU) 2015/760 of the European Parliament and of the Council of April 29, 2015 on European long-term investment funds, Section 3 (2) in conjunction with Section 4 (7) of the Law on Investment Companies (UBGG), Section 240 KAGB, Section 261 (1) No. 8 KAGB, Section 282 Paragraph 2 Clause 3 KAGB, Section 284 Paragraph 5 KAGB or Section 285 Paragraph 2 or Paragraph 3 KAGB ( Section 20 Paragraph 9 KAGB).

The acquisition of unsecuritized loan receivables is permitted for other investment funds in accordance with Section 221 (5) KAGB up to 30% of the investment fund. Notwithstanding this, the AIF capital management company may, under certain conditions, invest up to 95% of the other investment assets in unbranded loan receivables from regulated microfinance institutions ( Section 222 (1) KAGB). Capital management companies of alternative investment funds (AIF) that grant money loans for the account of the AIF or invest in unsecuritized loan receivables must, in accordance with Section 29 (5a) of the KAGB, have a structure and process organization appropriate to these transactions and their scope , which in particular includes processes for loan processing that Provides for loan processing control and the handling of problem loans as well as procedures for the early detection of risks. Pursuant to Section 285 (2) of the KAGB, the AIF capital management company may only grant money loans for the account of a closed special AIF under the following conditions:

  1. For the closed special AIF, loans are only taken out up to an amount of 30 percent of the aggregated capital contributed and not yet called in committed capital, calculated on the basis of the amounts after deduction of all fees, costs and expenses borne directly or indirectly by the investors are available for plants.
  2. The money loan is not given to consumers in the sense of § 13 BGB .
  3. Cash loans are only granted to a borrower up to a total of 20 percent of the aggregated capital contributed and not yet called in committed capital of the closed special AIF, calculated on the basis of the amounts after deduction of all fees borne directly or indirectly by the investors, Equipment costs and expenses are available.

For reasons of risk diversification, loans per borrower may not exceed 20% of the capital. The KAGB stipulates that cash loans may only be granted for the account of closed special AIFs, i.e. closed AIFs whose shares may only be acquired by professional and semi-professional investors - and not by private investors . Directive 2011/61 / EU on the managers of alternative investment funds applies .

According to Section 2 (1) No. 3b KWG , capital management companies and externally managed investment companies are not considered to be credit institutions , provided that they only conduct collective asset management as banking business , possibly including the granting of money loans .

Asset and risk class

As alternative investments, credit funds belong in the worst asset class because they have high financial risk , high volatility and low liquidity . This also applies to the risk class , because only risk-taking investors should choose this financial product. Private investors are not allowed to invest in closed AIFs; ​​for reasons of investor protection they are only allowed to acquire individual risks.

Others

There is a Federal Association of Alternative Investments e. V. , who represents 150 members of the alternative investments industry in Germany (2019).

literature

  • Rudolph, Bernd; Hofmann, Bernd; Schaber, Albert; Schäfer, Klaus (2007): Credit Risk Transfer. Modern tools and methods. Berlin, Heidelberg: Springer-Verlag Berlin Heidelberg.
  • Bartel, Niklas (1999): Asset-Backed Securities - A Product for German Banks. Published by Adolf-Friedrich Jacob. In: Trends in Finance and Banking.
  • Bhattacharya, Anand K. (1997): Asset-backed securities. New Hope Pa .: Frank J. Fabozzi Associates.
  • Goodman, Laurie (2002): Synthetic CDOs: An Introduction. In: Journal of Derivatives, Vol. 9, H. 3, pp. 60-72.
  • Jobst, Andreas: Collateralized Loan Obligatoins (CLOs) - A Primer, CFS Working Paper No. 2002/13.
  • Kaltenhäuser, Iris (2006): ABS Handbook Introduction to Asset-Backed Securities. Bayern LB. Munich.

Individual evidence

  1. ↑ Dieter G. Kaiser, Hedge Funds: Demystification of an Investment Category , 2009, p. 179
  2. ↑ Dieter G. Kaiser, Hedge Funds: Demystification of an Investment Category , 2009, p. 182
  3. ↑ Dieter G. Kaiser, Hedge Funds: Demystification of an Investment Category , 2009, p. 183
  4. ^ Rohan Douglas, Credit Derivative Strategies , 2007, p. 118
  5. ↑ BaFin of May 12, 2015, Gz .: WA 41-Wp2100 - 2015/0001
  6. ↑ OJ. L 123 of 19 May 2015, p. 98
  7. ↑ BaFin of October 17, 2016, Loan Fund: Lending by Alternative Investment Funds