As investors look beyond traditional fixed income for other sources of income and return, financial capital securities continue to attract attention. The Aegon Financial Credit Opportunities fund is designed to provide dedicated access to this area of the market.
Issued by banks, insurers and other financial institutions globally, financial capital securities occupy a unique position within the capital structure. These securities typically sit below senior debt and therefore offer higher levels of income, while often being issued by large, well-capitalised institutions with investment grade ratings.
This distinction is central to the opportunity. The additional yield available from financial capital securities is often driven by structural subordination, regulatory complexity and limited investor coverage rather than weaker issuer fundamentals. These characteristics can create attractive income opportunities while introducing a different type of risk that requires careful analysis. Investors may be compensated for taking on these factors and applying specialist market knowledge, rather than simply taking on lower credit quality.
A distinctive and evolving asset class
Financial capital securities have become an increasingly important segment of global credit markets. Regulatory changes introduced over recent years have strengthened the financial sector while also creating a broader and evolving universe of capital instruments.
For investors, these securities can offer higher income potential than some traditional fixed income sectors, alongside exposure to predominantly investment grade issuers.
They have also historically relatively low sensitivity to interest-rate movements and a strong income component.
Why active management matters
Despite the size of the market, financial capital securities remain a niche area of fixed income investing. The technical nature of the instruments, regulatory considerations and complexity of individual structures mean they typically receive less attention than more widely followed areas of corporate credit.
Identifying attractive opportunities requires detailed analysis of issuer fundamentals, security structures, capital positions and regulatory developments.
This is where active management can add value, by identifying securities where the potential returns justify the risks involved.
Building on established expertise
Investing in financial institutions has been a key component of many of Aegon’s UK-based credit strategies for years, reflecting the team’s long-standing experience in the sector and expertise across the global financials market.
The launch of the Financial Credit Opportunities fund is therefore not a new capability, but an extension of an established investment approach, focused exclusively on financial capital securities.
Supported by a dedicated financials research team, the fund draws on fundamental research to identify attractive opportunities across the market.
Why now?
We continue to see broad, long-term opportunities in financial capital securities. The market remains extensive, and its specialist nature can benefit active investors with the expertise and resources to navigate it effectively.
At the same time, investor interest in accessing specialist financials expertise has been growing. The Financial Credit Opportunities fund has been designed to meet this demand and provide investors with access across the global financial capital market.
Looking ahead
Through the Financial Credit Opportunities fund, investors can gain dedicated exposure to a specialist segment of fixed income with predominantly investment grade issuer exposure and income potential .
The value lies in understanding the complexities of the asset class and applying rigorous fundamental research .
Find out more
Visit aegonam.com/financial-credit-opportunities-fund for fund information, insights, performance and literature.
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