Read: A day as an investor by Angélique Pieterse

Angélique Pieterse is Senior Director Credit Risk Sharing and has been working at PGGM Investments since 2007. She works in the Credit & Insurance Linked Investments (CILI) team. Angélique: ‘CILI is responsible for two mandates: one is Credit Risk Sharing (CRS) which is about sharing in credit risk that banks have on their balance sheet from core lending activities; the other one is Insurance Linked Investments where exposure to natural catastrophe risk is shared with the reinsurers underwriting
such risks.’

No such thing as a regular day

‘My focus is on Credit Risk Sharing (CRS) transactions, of which I have closed more than 25 transactions over the years. As a Senior Director I lead the transaction process, which can take between 1 months up to 1 year to finalise. Next to that, my role is to develop and maintain relationships with the banks and to represent the team on various occasions such as conferences and so much more. There is no such thing as a regular day, which makes my role very exciting and interesting.’

Lobbying for sustainable market development

The market for CRS transactions has been growing over the years. PGGM Investments has been playing a leading role. Not only by being one of the longest-standing investors, but also by being actively involved in regulations and lobbying for the development of the CRS market in a sound and sustainable way. Angélique: ‘One of the visible results of this is the STS framework for CRS transactions, where STS stands for Simple, Transparent and Standardised. The STS framework has recently been created by the EU to support bank lending, as part of a package to help European economies recover more quickly from the economic effect of the COVID-19 pandemic. We are extremely proud to have invested in our first STS-qualifying transaction. It is also the largest STS-qualifying transaction issued in the market today.’

Potential Risk: deterioration of standards

A potential risk that the team experiences in the market is a deterioration of standards. In a CRS transaction the investor takes over credit losses from a bank via a first loss tranche structure. This means the underlying portfolio of loans is several times larger than the amount at risk. The transaction terms have a number of features that affect the credit risk the investor runs. Angélique says: ‘Having had a very benign and long credit cycle resulting in solid returns for these transactions, we see that some investors become more willing to accept looser standards, but perhaps may not fully realise the impact of a serious rise in defaults. The experience of significant losses, if not expected, may tarnish the reputation of CRS transactions. The STS regulation sets clear standards for CRS transactions that help mitigate these concerns.’