Legal & General Investment Management has launched a new Short-Term Alternative Finance Fund which will sit on a newly launched RAIF platform (a Luxembourg domiciled umbrella fund platform), in response to growing interest from investors.

The Luxembourg-based fund will invest in a portfolio of sub-1 year private credit assets, offering investors a strategic alternative to cash and other short-dated credit alternatives. The strategy will target attractive yields and low volatility, with an average investment grade rating.

Types of short-dated alternative finance the Fund could invest in include capital call facilities, supply chain finance, trade receivables and asset-backed financing. The Fund will target a wide range of institutional investors, most notably insurance companies, pension schemes, endowments and family offices.

Launched in 2021, LGIM’s first Short-Term Alternative Finance strategy, now manages over £1bn across short-dated strategies on behalf of a range of clients and allows third party investors to invest alongside the Legal & General Group.

Following a growing demand for credit facilities from alternative investment funds and large corporates, meaning banks can no longer service these companies alone, LGIM has developed trusted relationships with a number of global banks and other financial intermediaries to source opportunities.

All transactions for the fund are underwritten by LGIM’s Alternative Debt investment team, led by Matthew Taylor, with Sam Jones acting as joint fund manager.

Matthew Taylor, head of alternative debt, LGIM said: “We believe short-dated alternative finance can provide an attractive solution for enhanced returns in comparison to liquidity funds or holding cash. It achieves this with low duration and volatility helping investors to maintain sufficient liquidity with potentially reduced risk when compared to other alternatives.”

Nick Bamber, head of private credit, LGIM added: “We’re proud to have launched a second iteration of this fund and to open it up to investors. Our short-term strategy is a fast-growing area of our business, having deployed over £2bn since 2021. Having grown LGIM’s footprint and product offering in continental Europe for several years, we believe this asset class offers attractive yields, low risk and with a strong pipeline ahead. This makes short term alternative finance a potentially attractive, strategic cash alternative for investors.”

LGIM further said the newly launched Luxembourg based RAIF platform is a key step in its European and global growth ambitions; providing international investors access to LGIM’s private credit expertise. This will be a significant enabler of further funds with an international focus LGIM will look to launch on the platform over the course of the year.

LGIM manages over £18bn of private credit investments on behalf of institutional clients globally. Its investment capabilities extend across real estate debt, infrastructure debt, corporate debt and alternative debt.