JPMAM snapping up mortgage portfolios for institutionals
EUROPE - JP Morgan Asset Management (JPMAM) has said that it is negotiating with banks across Europe on the acquisition of infrastructure debt loans on behalf of institutional investors.
Bob Dewing, managing director of global real assets and infrastructure investments, told IPE the company was seeking to build up portfolios of assets by acquiring loans from a number of banks, mainly focusing on social infrastructure, regulated utilities and transport.
Unlike some asset managers that are setting up funds to acquire loan portfolios and then lend directly to SMEs and corporations, JPMAM said it preferred to manage customised portfolios on behalf of investors.
Dewing said this approach better matched clients' needs and requirements, and meant investors were the direct owner of the assets.
JPMAM, which recently acted on the behalf of a number of investors in its first purchase of a loan portfolio, is now conducting due diligence on the possible acquisition of two more portfolios from European banks.
Earlier this year, JPMAM won a mandate from from PensionDanmark to buy up $750m (€600m) of senior secured infrastructure loans in Canada, Europe and the US.
At the time, Torben Möger Pedersen, chief executive of the Danish pension fund, said: "The current market situation has created an opportunity where we are able to acquire long-term senior secured infrastructure loans at very attractive risk-adjusted spreads."
The size of the infrastructure debt portfolios set up by JPMAM typically ranges from £200m (€250m) to £400m, according to Dewing.
"Under £200m, such a deal is neither worthwhile for the bank to sell to us nor advantageous for us to conduct the due diligence, as it represents a too important amount of work for the return on investment provided," he said.
"Similarly, allocating more than £400m to such loans would lead to a high concentration within the portfolio."
JPMAM expects its portfolios to yield between 200 and 300 basis points over the floating rate.
However, some European pension funds have been reluctant to acquire such bank loans.
A spokesman for the €261bn civil service pension scheme ABP said: "Among the core issues of responsible investing is the distribution of risk, which is at odds with investing an additional part of our assets in mortgages."
Furthermore, a recent report published by ratings agency Moody's showed that asset managers would have to overcome a number of regulatory challenges to benefit from the opportunities created by deleveraging European banks, as Brussels could see these activities as 'shadow banking'.
According to Moody's, shifting any activity from the regulated bank sector to an unsupervised sector might encourage policymakers to revisit the regulatory framework.