P&G launches leveraged European CLO fund Zoo5

Michelle D’souza

Senior reporter

P&G is looking to achieve double-digit returns through a new fund focused on European CLO triple A tranches, named Zoo5. This will “seize a specific alpha opportunity on the CLO asset class with the aim of exploiting a favourable market momentum”, officials at the firm tell Creditflux.

Structured as an Italian Reserved Closed-end Alternative Investment Fund, the vehicle will use leverage to enhance returns. The vehicle has a five-year life expectancy.

P&G will build a portfolio of around €60 million following its December first close, but could bring its target portfolio to €100 million, if the fund reopens for subscriptions.

The new vehicle continues the “Zoo” series, a family of structured finance vehicles launched by P&G in the early 2000s. The firm also invests across the ABS and CLO capital structure with other various mandates, and is a European CDO of ABS manager.

“We found a lot of relative value in triple As, with tranches above 200bp”

Luca Pantaloni, Head of ABS/CLO management | P&G

Luca Pantaloni, head of ABS/CLO management at P&G, says the fund can look at both primary and secondary opportunities, but at present there is more value in secondary, where you can find shorter bonds with convexity after last year’s widening.

“December was a good month for ramping Zoo and we found a lot of relative value in triple As, where you could find tranches still above 200 basis points (discount margin),” he says. “But after the fast secondary tightening in January (in line with broader fixed income markets), and with triple A spreads now around 20bp tighter, we will probably be on the sidelines for a bit. This will assist primary CLO prints even if arbitrage is still not so favourable at these levels.”

As Creditflux goes to press, European CLO triple As are being marketed just inside 200bp. This compares to a 223bp average in November and December. But Pantaloni says relative value for European CLO triple A tranches compared to other IG asset classes remains strong.

Share this article:

${prev-page}

${next-page}

Browse more Creditflux newsletters

Global credit funds & CLO's

February 2023 | Issue 252

Published in London & New York.