Japan’s Norinchukin Bank, one of the biggest buyers in the $1.3tn global collateralised loan obligation (CLO) market, and NatWest Group, are among the big name institutions investing in private credit CLOs, according to a report by Bloomberg.
Japan’s Norinchukin Bank, one of the biggest buyers in the $1.3tn global collateralised loan obligation (CLO) market, and NatWest Group, are among the big name institutions investing in private credit CLOs, according to a report by Bloomberg.
The report cites unnamed sources with knowledge of the matter as saying that other high-profile entrants are expected to follow suit, signalling a significant change from just a few years ago, when limited visibility into underlying borrowers and a lack of secondary-market liquidity meant private credit CLOs only appealed to specialised money managers.
As banks scale back risky financings, direct lenders are continuing to grab market share meaning there’s more debt for them to bundle into chunks of varying risk and return to create CLOs. According to data from Bloomberg, these private credit securitisations have accounted for roughly 20% of total market issuance this year, compared to just above 10% historically.
The report quotes Bain Capital Portfolio Manager Mike Boyle as saying: “We anticipate that private credit CLOs could comprise up to 50% of our financing structures over the next few years. Private credit growth is faster than leveraged loan market growth.”
