September 2021 | Issue 238
News
Patience pays off as control CLO equity investor expands into US
Patience pays off as control CLO equity investor expands into US
Michelle D’souza
Reporter
US CLO equity investor Lakemore Partners signalled major CLO growth plans after it hired US loans veteran Dan Norman in August. Officials at the firm say they have been building towards this important development.
Chief investment officer Mohamed Seif says: “As soon as we got to five years of track record and had more than $1 billion assets under management, we knew we would be in a position to establish our US presence and for it to be the base for our global growth.”
Lakemore was founded by Ahmed Farid Alaulaqi and Seif in 2016. The pair previously worked at the National Commercial Bank of Saudi Arabia. Although the firm’s roots are in the middle east, the investment team largely sits in London, and with Norman’s arrival it now has a base in Scottsdale.
Lakemore has put CLO equity investments at the heart of its business plan. It typically invests in control US CLO equity positions comprising over 95% of the tranche. It recently closed Aquatine IV at $400 million.
Norman says the firm’s style is to partner on a repeat basis with top-tier US CLO managers that have demonstrable through-cycle track records.
“The US is now our base for global growth”
Mohamed Seif, Chief investment officer | Lakemore Partners
“We have a long-term focus on managers who can build high-quality portfolios that can not only withstand but can be opportunistic during volatile markets,” he says. “That, with an ‘ultimate’ control style of 95-100% of the equity, we believe, gives us the best opportunity to maximise total return to investors over the life of these transactions.”
Lakemore is the second example of a CLO investor hiring a loans specialist to its team. In February, Creditflux reported Pretium Partners’ loan analyst Alyse Kelly had joined Schroders as a portfolio manager on its CLO-buying team.
The timing of Lakemore’s growth strategy has been a boon. US CLO primary issuance is on track for a record-breaking year and Lakemore believes CLO and loan issuance will remain strong in the short to medium term.
On top of that, control equity investors have been busy refinancing and resetting deals to take advantage of historically attractive CLO liabilities.
Liability spreads have fallen to 2018 tights and asset spreads remain sticky (loans pricing at 375bp in January are still around 350bp), which has kept CLO economics attractive.
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Global credit funds & CLO's
September 2021 | Issue 238
Published in London & New York.
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