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.
News
Long lock-ups and quick entry tempt three new firms into CLO management
by Lisa Lee
Regardless of the ebbs and flows of the market, and whether times are volatile or calm, the CLO market can count on more shops wanting to enter the space.
The asset class welcomed three new managers in the past month. Alternative asset manager Obra Capital launched a CLO business in the US. Hedge fund Fortress Investment Group took its US expertise into Europe, and French firm CIC Private Debt debuted as a brand new European manager.
Scott Macklin, head of leveraged finance at Obra, said now is a good time to launch. “Both the CLO and loan markets are experiencing periods of investor enthusiasm, which has resulted in spread compression over the course of the year,” he said.
So far this year, five new BSL CLO managers have come to market across the US and Europe. The roster of manager hopefuls is continuing to grow, especially in Europe. It includes shop’s like Spain’s Arcano and the princely family of Liechtenstein’s LGT Capital Partners.
US CLO managers are also keen to grow in Europe, including Nuveen, AGL Credit, Octagon and LCM Asset Management.
This has resulted in spread compression over the course of the year
Scott Macklin
Head of leveraged finance
Obra
For credit shops, CLO management provides an opportunity to grow assets under management and escape the daily or immediate liquidity demands of mutual funds or ETFs. Managing CLOs also offers quick entry into the leveraged finance space, boosting a firm’s profile in the market, said market participants.
Investors have reasons to take a chance on new managers. They have generally outperformed other managers in recent years, according to Nomura Research led by Paul Nikodem, which was issued in October. They have significantly outperformed large, established managers in cumulative par build, and had lower triple C downgrade performance than other small and medium-sized managers, the research said.
Nonetheless, CLOs by new managers typically command a premium and not all investors are willing to take the risk. The triple As of Fortress’s first European CLO cleared more than 10bps wider than those of deals from existing managers.
