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US challenges keep number of CLO hopefuls similar across Atlantic
by Shant Fabricatorian
Both the US and European CLO markets have a long list of financial firms looking to start management businesses, but the smaller European market’s list is longer, relative to its size.
In the US, 153 CLO managers currently retain CLO AUM in the USD 1.1tn market. Across the Atlantic, 70 CLO managers populate the EUR 247bn European market, according to Creditflux data as of 31 March. That makes the European market around twice as densely populated with managers, per unit of AUM.
There are a number of reasons that Europe is more saturated with CLO managers for its size. For one, US asset managers with a CLO shop are more eager than their European counterparts to expand their businesses across the pond. Among the list of European manager hopefuls, AGL and Elmwood are US names looking to make their mark in Europe. Going the other way, the field is sparser.
Another reason is that more extreme manager tiering in the US makes it a challenging environment for newbies, according to David Altenhofen, head of investments at Accunia Credit Management.
The comparable data on triple As shows the difference. According to Creditflux data, looking at debuts over the past 12 months, the new manager premium in Europe is around 8-10bps compared to average triple A spreads by established managers issuing deals in the same week. The new manager premium in the US, on the other hand, is practically double that, at some 15-20bps in the same week of issuance.
Finally, European CLOs look more attractive than US deals at the moment.
“Investors are saying, ‘Hey, we’re really much more interested in getting exposure to European assets and particularly floating rate assets,’ as the view is that the return opportunities are attractive,” said Brian Yorke, portfolio manager at Muzinich.
