Published in London & New York
10 Queen Street Place, London
1345 Avenue of the Americas, New York
Creditflux is an
company
© Creditflux Ltd 2024. All rights reserved. Available by subscription only.
Analysis CLOs
CLOs grow from strength to strength
by Tom Davidson
The first quarter of 2024 saw such extraordinary issuance across the global CLO market that it was enough to outpace the equally extraordinary amortisation occurring in older deals
As the chart of CLO AUM above shows, the CLO market keeps growing. According to our data, as of 31 March 2024, the CLO market stood at USD 1.32trn, adding USD 24bn compared with the end of 2023. Over a longer timeframe the growth is even more dramatic. In the five years since the end of Q1 2019, the CLO market has grown by 85%.
Who are the top managers? That answer is remarkably stable. The quartet at the top of our league table of global CLO managers by AUM — Blackstone, Carlyle, CSAM and PGIM — remains unchanged from the end of 2023.
Global CLO AUM ($bn)
All data as of 31 March 2024. Source: Creditflux
Golub moves up three spots to fifth
These firms shouldn’t rest on their laurels though. The new fifth place challenger is Golub, which advanced three places in a quarter. That reflects the growth of private credit CLOs, and private credit more generally. Golub remains the undisputed heavyweight of the middle market CLO asset class. The manager now has USD 26.57bn of assets under management, compared with a total AUM of all middle market deals that has grown to USD 123.53bn.
The other fast climbers in the top half of our rankings are Elmwood, Onex and Hayfin. Elmwood in particular is growing at breakneck pace. The fact it has only reached 29th place globally is a reflection of the scale of the largest managers in the market.
So what is driving this growth? The biggest factor, as always, is demand for triple A paper. Anecdotally, market participants point to increased demand from two types of investor in particular. One is an old part of the CLO market — US banks. But although the largest holders of CLO paper, like JP Morgan and Wells Fargo, remain active, they have been joined by newer names such as Key Bank and Barclays, helped by certainty that CLOs issued in a loan format do not count as securities.
The other new type of senior investor is CLO ETFs. While still relatively small in terms of overall holdings, the largest CLO ETF has been adding a billion dollars of capacity a month this year, supporting secondary and primary markets.
85
%
Growth in the CLO market in the five years since the end of Q1 2019
Combined with continuing support from other CLO triple-A buyers, it’s no surprise spreads are grinding tighter. GoldenTree threw down the gauntlet of a 145bps triple-A print at the start of May. While GoldenTree is often an outlier (one manager described them to us as the only tier 0 manager), if new issue senior spreads really are moving towards 145bps, then the market should expect a further wave of resets and refis.
One equity investor says: “At 145 the entire market is in the money. The only constraint now is getting in front of an arranger.” A manager told us they moved to reset some deals at the end of 2023, despite the economics being borderline, on the expectation that the queues this year would be too great.
