Significant Risk Transfer (SRT)

Source: MCQS as of June 30, 2026. 1 Structured Credit Investor (SCI). Regulatory capital transactions invest in a first loss or a junior slice of the entire loan portfolio, which bears higher risk of default and capital loss. 2 Structured Credit Investor (SCI) measured over the last 3 years.

Strategy Risks

Investments in the strategy include several risks and limitations, including but not limited to the risk of loss.

Regulatory & Compliance Risk

SRT strategies operate within complex and evolving regulatory frameworks designed to optimize bank capital treatment. Changes in banking regulations, supervisory interpretations, or jurisdictional differences may impact the fund’s ability to deliver capital relief, potentially affecting investor returns and fund viability.

Counterparty Risk

SRT transactions often involve bilateral arrangements with banks or financial institutions. The strategy is exposed to the creditworthiness and operational reliability of these counterparties. A counterparty default or downgrade could impair the structure and lead to losses or disruptions in expected capital relief.

Structural & Legal Risk

These transactions are highly bespoke and legally complex, often involving synthetic securitizations, credit protection instruments, or risk transfer agreements. Legal enforceability, documentation quality, and jurisdictional differences can introduce uncertainty around rights, obligations, and recovery in adverse scenarios.

• EU/UK: Legal enforceability of credit protection instruments, especially in synthetic structures, is critical. Failure to meet retention, disclosure, or documentation standards under the Securitization Regulation may invalidate capital relief.

• U.S.: Structuring must navigate overlapping insurance, swap, and securities regulations. Guarantees or credit derivatives may trigger state-level insurance regulation or federal swap rules, complicating execution

Model & Data Risk

Capital relief structures rely heavily on bank-provided data, quantitative models and assumptions to assess risk transfer, capital impact, and pricing. Inaccurate data, flawed modeling, or unrealistic assumptions can lead to mispricing, regulatory rejection, or underperformance.

Liquidity & Exit Risk

SRT investments are typically long-dated, illiquid, and customized to specific bank portfolios. Secondary market options are limited, and early exit may be difficult or costly. This can constrain portfolio flexibility and delay capital redeployment or distributions.

Manulife | CQS Investment Management which is a trading name of CQS (UK) LLP, authorised and regulated by the UK Financial Conduct Authority, and/or CQS (US), LLC which is a registered investment adviser with the US Securities and Exchange Commission. The term “CQS” or “Manulife | CQS Investment Management” as used herein may include one or both of CQS (UK) LLP and CQS (US), LLC.

Manulife | CQS Investment Management is a subsidiary of Manulife Investment Management (Europe) Limited.

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