To CLO or not?

What’s going on with collateralized loan obligations (CLOs)?

Earlier this month - April 2024, GoldenTree Asset Management successfully secured USD 1.3 billion in commitments to invest in the riskiest, first-loss equity tranches of collateralized loan obligations (CLOs). This achievement not only surpassed their initial goal of USD 1 billion but also highlights the growing investor confidence and demand for high-risk, high-return financial instruments.

The equity tranche, representing approximately the bottom 15% of the capital structure, attracted a global investor base consisting of pension funds, insurance companies, and family offices. "Demand for our CLO equity has increased as investors recognize the value it can create within their portfolio," stated Kathy Sutherland, CEO of GoldenTree.

GoldenTree is not alone in this regard. Similarly, Brightwood Capital Advisors also made significant strides by closing the second-largest middle-market CLO of the year, valued at $707 million. This deal in the private credit sector further signals a robust …