The material on this site is for financial institutions, professional investors and their professional advisers. It is for information only. Please read our Terms & Conditions, Privacy Policy and Cookiesbefore using this site. Please see our Subscription Terms and Conditions.

All material subject to strictly enforced copyright laws. © 2022 Euromoney, a part of the Euromoney Institutional Investor PLC.

Are CLO managers getting away with murder?

The amount of dry powder that private equity firms now have means they are sometimes putting even more than 50% equity into deals – it’s a huge cushion that is contributing to reckless lending behaviour in the debt markets. But are lenders taking too much comfort from a buffer that could rapidly disappear?


Illustration: Sam Hadley

What came first, the leveraged loan chicken or the CLO egg? 

Seven rate hikes by the Federal Reserve since December 2015 have prompted a wholesale shift of the sub-investment grade credit market from fixed-rate bonds to floating-rate loans, largely because issuers are safe in the knowledge that there is a seemingly insatiable investor base of collateralized loan obligations (CLOs) desperate to buy. 

Around $274 billion of leveraged loans were issued in the US in the first half of 2018, and the market is forecasting a record $150 billion of CLO issuance to mop them up. CLOs buy around 65% of all US leveraged loans, and retail investment in the asset class has also now soared to a 20% market share.

The roots of the US CLO market’s record-breaking year can be traced back not only to the pace of loan issuance but also to the February decision by the US Appeals Court that these vehicles would no longer be subject to retention regulations under the Dodd Frank Act

You have reached premium content. Please log in to continue reading.

Read beyond the headlines with Euromoney

For over 50 years, our readers have looked to Euromoney to stay informed about the issues that matter in the international banking and financial markets. Find out more about our different levels of access below.


Unlimited access to and

Expert comment, long reads and in-depth analysis interviews with senior finance professionals

Access the results of our market-leading annual surveys across core financial services

Access the results of our annual awards, including the world-renowned Awards for Excellence

Your print copy of Euromoney magazine delivered monthly

£73.75 per month

Billed Annually


Unlimited access to and, including our top stories, long reads, expert analysis, and the results of our annual surveys and awards

Sign up to any of our newsletters, curated by our editors


Already a user?