Italian defined contribution provider Arca Previdenza intends to grow its exposure to Italian minibonds, as it sees value in the asset class’s illiquidity.

Speaking in the upcoming issue of IPE magazine, Marco Vicinanza, deputy investment director at the €2.6bn institution, says it views the nascent market for the funding of small and medium-sized enterprises (SMEs) as more attractive than high-yield bonds or bank loans.

“To us, a good example of value in illiquidity is Italian minibonds, an asset class that has shown strong growth, with many small to medium-sized issuers coming to the fore in recent months,” Vicinanza says.

“We see investing in SME credit as an important opportunity. It represents both a chance to provide structural support to the Italian economy and a way to provide our clients with the benefits of long-term investments that match their profiles.”

Industriens Pension, the Danish pension provider, sees greater value in high-yield bonds and bank loans – to which it has allocated more than 10% of its portfolio – but portfolio manager Fredrik Frei Rast is uncertain how much it will grow exposure in future.

He says both markets have been “particularly crowded in [recent] years”, which has presented the fund with hurdles when investing.

He also sees the more illiquid spectrum of the fixed income market as attractive.

“They carry a premium compared with the more liquid side, and the floating rate is attractive in a low interest rate environment,” he says. 

For more on high-yield bonds and loans from Vicinanza, Frei Rast and Pierre Jameson, CIO of the Church of England Pension Scheme, see the October issue of IPE