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Agency-backed investments are generally tied to development activities or promotion of a country’s exports globally. Given the credit enhancement feature, the risk of loss in the resulting high investment-grade product is largely uncorrelated to the credit of the underlying investment.
Below is an indicative funding structure for an agency-backed investment:
The value proposition
Agency-backed investments generally benefit from a significant amount of credit enhancement covering 80% to 100% cover of principal and interest. This results in highly rated investments.
Export Credit Agencies and Multilaterals Institutions are often the credit enhancement providers for these investments. Given their government backing and high credit rating, credit enhanced investments often benefit from very low Solvency Capital Requirement.
By obtaining a high amount of credit enhancement, the goal is to generate an attractive risk-return profile for all stakeholders.
Agency-backed investments promote international trade and development by focusing on high impact sectors globally.
Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Investing in the water-related resource sector may be significantly affected by events relating to international political and economic developments, water conservation, the success of exploration projects, commodity prices and tax and other government regulations. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.
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