A NEW debt fund is seeking to bet on a recovery in Europe’s banks, by investing in assets it believes are hugely undervalued.
Axiom European Financial Debt announced its intention to float on the London Stock Exchange yesterday, and hoped to raise £100m to £200m in its first round of fundraising.
One of the strategies adopted by the fund will be to buy tier one capital instruments issued by banks before new rules came in to force replacing them with other instruments. Axiom hopes the banks will then buy up these old instruments several years before their maturity dates, boosting returns.
Another option is to look at relatively complicated bonds which are less attractive to investors, and to those which were issued by banks which were subsequently taken over by another lender with a strong credit rating.
“In this new vehicle, we are trying to capture the illiquidity premium on asset classes which are less liquid,” said Axiom managing partner David Benamou. “Tier one and tier two securities are a market bigger than €1 trillion, but only €200bn to €300bn are pretty liquid, so there are interesting deals to be done.”