SWITZERLAND - Pension funds will invest more in Collaterised Loan Obligations (CLOs) if the arbitrage opportunity remains intact, said Rene Biner of Partners Group.
Biner, partner and head of private debt at the Swiss asset management firm, made his comment as Partners Group closed its first CLO fund at €400m, with an undisclosed number of pension funds as investors.
The Penta CLO 1 has been designed to offer exposure to a diversified portfolio of senior, mezzanine and second lien leveraged buyout loans. Penta CLO 1 is the first of several products Partners Group plans to launch in the space.
Said Biner: "CLO issuance has increased dramatically in the last 24 months. We want to build a scalable platform in the private debt market – this is not a one off."
Whilst stressing the complexity of the CLO market, Biner said that broadly speaking, if economic conditions remained the same, pension fund interest in these structured debt products could be expected to increase.
Generally, if default levels remain low and if the interest rate differential between the cost of capital for CLOs and the spread that CLOs can earn on the loans remains the same as it has been over the last 24 months, I expect the volume to increase and interest from pension funds to be there."
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