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May 2023 | Issue 254

AlbaCore prepares investment grade and opportunistic CLO strategies with European focus

Michelle D'Souza headshot
Michelle D’souza
Senior Reporter
AlbaCore Capital Group is building out its CLO investment capabilities, with officials at the firm telling Creditflux about the launch of two new CLO strategies — one focused on investment grade CLO tranches and another with a more opportunistic CLO approach.
The manager will focus on European CLOs, but with some ability to invest in US deals.
The move comes just after the London-headquartered manager priced its fifth European CLO, AlbaCore Euro CLO V, via Bank of America as sole arranger, and NatWest Markets as co-placement agent.
Seán Golden, who joined AlbaCore at the end of last year to launch the CLO investment strategy, says there have been good relative-value opportunities in triple Bs and it is possible to construct a defensive portfolio, while still delivering around low- to mid-teens returns.
“There have been good relative value opportunities in triple Bs”
Seán Golden, Managing director | AlbaCore
“Over the last 12 months, triple As and triple Bs have been most attractive on a relative value basis, and European triple Bs look cheap versus US,” he says. “The interesting thing in the opportunistic strategy is that it is possible to ramp a portfolio now that is overweight triple Bs with some double B, single B and equity, and still achieve low to mid-teens returns.”
Golden says triple Bs look attractive partly as a function of supply on an absolute basis (excluding the liability-driven investment sell-off window last year). For that reason, those tranches have tended to look wide versus double As and single As because they haven’t seen as much supply, he says.
Triple Bs in primary look quite cheap from an all-in yield perspective, Golden says. However, the firm has been more active in secondary across the capital structure given the convexity available.
AlbaCore’s investment grade CLO strategy will have flexibility to invest across those rating categories. “We think there’s a lot of value in being nimble across IG tranches because relative value can change quickly given each tranche can have a disparate buyer base, whereas if you’re looking at the lower part of the capital structure there is greater investor crossover,” he says.
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Global credit funds & CLO's
May 2023 | Issue 254
Published in London & New York.
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