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Obra builds out new CLO management business around CLO investing
by Lisa Lee
Obra Capital became the newest manager in the CLO space with last month’s pricing of Obra CLO 1, but the origin of the team dates back to the days before the Great Financial Crisis, when Blair Wallace, Peter Polanskyj and Scott Macklin were together at alternative credit shop Och-Ziff Capital Management (now Sculptor Capital Management).
Now the trio have created a new CLO management business that’s producing equity for Obra’s insurance outfit. While there are several credit-focused asset managers which have built out insurance businesses, Obra has gone the opposite route, and built a credit business around Obra’s historical insurance product investing.
Wallace was the first to settle at Obra. He saw an opportunity to create, rather than simply buy for the insurance arm. “It was pretty clear that broadening our forms of insurance product investing was going be a real key to our growth,” said Wallace, who is now Obra’s CEO.
“Our thesis from the outset was, let’s create assets that we want to consume, and if we make more than we can consume, we can sell that surplus to others who have similar risk appetites.”
To reach his target, Wallace brought on board his former colleague Peter Polanskyj, now Obra’s head of structured credit. Then he hired Matt Roesler, one of Polanskyj’s long-term relationships. Roesler was a partner at Apollo, investing in structured credit and securitisations on behalf of various Apollo clients, including insurance arm Athene.
The initial reach out to Scott Macklin was about an interest in investing in the CLOs that Macklin was issuing at AllianceBernstein, although the trio had worked mere feet away from each other at Och-Ziff.
But these talks were upended when Obra purchased KDP Investment Advisors, which brought a 20-year track record in high-yield leveraged finance. Now it had its own credit team, Obra saw an opportunity to structure its own CLOs. Thus Obra flipped the script on Macklin, and rather than invest in his CLOs, it hired him to start a new CLO management business.
Obra’s CLO team (from left): Blair Wallace, Scott Macklin and Peter Polanskyj
“I’d worked closely with Scott at Och-Ziff and followed his development of the AllianceBernstein platform closely. I’d seen up close how he approached credit investing. Prior to hiring Scott, if we as a firm lacked something, it was those kind of fundamental credit chops. And Scott has that in spades,” said Polanskyj.
“Pairing the team with Scott was a good fit stylistically. A more defensive style also fits our capital’s investment objectives. As an investor in the field of equity, we care about strong returns, but we also care about the volatility of returns.”
For Macklin, who had started a new CLO manager before, the appeal of reuniting with Wallace and Polanskyj was enhanced by Obra’s strong interest in buying CLO equity for its own balance sheet. Macklin is currently head of leveraged finance and runs the CLO operations at Obra.
“Every CLO platform requires a healthy amount of capital commitments to achieve lift-off. It’s all too common that when a CLO management business starts up, it’s launched with what I like to call ‘reluctant capital’,” Macklin said.
“Often, that financial backer may not understand CLOs that well, and may be very reticent to actually deploy capital when called upon,” he added. “Obra is bringing enthusiastic capital to the table. Its primary goal is to invest in CLO equity because it considers it a key component of its larger portfolio construction.”
Obra is already working on its next CLO, and has plans for others further ahead. It is also open to hiring more people.
“I think most managers would consider us as having a full team now, but we do have additional demand to bring in more analysts. If there are any great analysts reading this article, please reach out,” said Macklin.
