Manulife CQS Investment Management is actively promoting its fourth CQS Regulatory Capital Relief Fund, aiming to secure about $1 billion from investors. The firm is touting attractive double-digit annual returns, with a target internal rate of return of approximately 13%. This builds on the success of its previous fund, which achieved over 11% as of the end of the first quarter, demonstrating consistent strong performance in the significant risk transfer (SRT) market.
Significant risk transfers are experiencing a boom as banks, particularly in Europe and North America, increasingly use these instruments to offload risk from their loan portfolios to investors. This process frees up regulatory capital, which banks can then deploy for new lending initiatives or shareholder payouts. Sales in the first half of 2026 exceeded $18 billion, a notable increase from approximately $15 billion in the same period last year, and are on track to achieve a sixth consecutive annual record. This growth persists despite broader economic concerns about inflation, the AI boom, and declining government bond yields.
Manulife CQS has been an active investor in SRTs for over a decade, with its CQS RCR IV fund planning to invest in deals linked to bank lending across Europe, North America, and Asia. While the fund will primarily focus on SRTs tied to corporate loans, it may also consider other assets, such as project financing transactions. Historically, the firm's first three funds have absorbed annualized credit losses below 0.2%, highlighting the stability of these investments. The new fund will be managed by a team led by Wouter Van Assche. Other firms like Polar Asset Management Partners Inc., Crescent Capital, AXA IM Alts, and Jain Global LLC are also actively involved in raising capital for SRT strategies, underscoring the growing interest in this market.
