Manulife CQS Investment Management is seeking approximately $1 billion for the fourth iteration of its CQS Regulatory Capital Relief Fund, according to reports from Bloomberg and The Logic. The fund, which utilizes debt to enhance performance, is targeting an internal rate of return of about 13%, compared to over 11% achieved by the previous vintage as of the end of the first quarter. The fund will invest in deals linked to bank lending across Europe, North America and Asia, with deployment primarily focused on SRTs tied to corporate loans. This latest fundraising comes less than a year after raising $1.1 billion for its third fund, demonstrating continued strong investor demand for the strategy.
SRTs (Significant Risk Transfer) sales have experienced significant growth, with first-half 2026 sales surpassing $18 billion compared to approximately $15 billion a year earlier, as reported by Financial Post. According to estimates by Crescent Capital Group LP, which also invests in these instruments, sales are on track for a sixth straight annual record. Banks primarily in Europe and North America are expanding their use of these instruments to offload risk on loan portfolios to investors, freeing up regulatory capital for new lending or shareholder payouts.
Manulife CQS has been investing in SRTs for more than a decade and has demonstrated strong performance metrics. According to reports from Financial Post, the fund's annualized credit losses absorbed by SRTs held in the first three iterations have been below 0.2%. The CQS RCR IV fund may also purchase other assets such as transactions linked to project financing, with the fund being managed by a team led by Wouter Van Assche, a senior portfolio manager at the alternative credit firm.
The SRT market is attracting significant institutional interest, with other notable investors including Toronto-based Polar Asset Management Partners Inc. and Crescent Capital recently raising or seeking capital for SRT strategies. Last year, BNP Paribas SA's AXA IM Alts raised $2.5 billion to invest in these instruments, while Jain Global LLC launched a fund focused on bank capital relief trades including SRTs. Despite concerns about inflation, the debt-fuelled AI boom, and slumping government bonds potentially leading to greater credit risks for banks, demand for SRTs remains strong.
