Manulife CQS touts double-digit SRT returns in US$1 billion pitch

Manulife has been investing in SRTs for more than a decade. Its CQS RCR IV fund will invest in deals linked to bank lending in Europe, North America and Asia Photo by Roberto Machado Noa/LightRocket via Getty Images

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The firm is seeking around US$1 billion for the fourth iteration of its CQS Regulatory Capital Relief Fund, according to people familiar with the matter. The fund, which uses debt to boost performance, is targeting an internal rate of return of about 13 per cent, compared to over 11 per cent achieved by the previous vintage as of the end of the first quarter, they said, asking not to be identified because the matter is private.

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SRTs are booming as banks primarily in Europe and North America expand their use of the instruments to offload risk on loan portfolios to investors, freeing up regulatory capital that can then be used to back new lending or shareholder payouts.

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Sales in the first half of 2026 surpassed US$18 billion, compared to about US$15 billion a year earlier, and are on track for a sixth straight annual record, according to estimates by Crescent Capital Group LP, which also invests in the instruments. Demand remains strong despite concerns that inflation, the debt-fuelled AI boom, and slumping government bonds could lead to greater credit risks for banks.

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MCQS has been investing in SRTs for more than a decade. Its CQS RCR IV fund will invest in deals linked to bank lending in Europe, North America and Asia, according to the people.

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It will likely be mostly deployed in SRTs tied to corporate loans but may also buy other assets such as transactions linked to project financing, they said, adding that annualized credit losses absorbed by SRTs held in the first three iterations of the fund have been below 0.2 per cent.

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Other investors that have recently raised, or are looking to raise, capital for SRT strategies include Toronto-based Polar Asset Management Partners Inc. and Crescent Capital. Last year, BNP Paribas SA’s AXA IM Alts raised US$2.5 billion to invest in the instruments and Jain Global LLC launched a fund focused on bank capital relief trades including SRTs.

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CQS RCR IV will be managed a team led by Wouter Van Assche, a senior portfolio manager at the alternative credit firm, the people said. A representative for Manulife CQS declined to comment.

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