Sector developments and company hires

Strategic partnerships ‘positive’ for CLO managers
The number of US broadly syndicated loan CLOs for which managers retained their majority equity stake continues to exceed the number of CLOs where equity was sold to third parties, according to data published in Fitch’s latest CLO Asset Manager Handbook. The percentage of US managers that retained a majority in their CLOs’ equity increased to 60% in 2022 from 54% in 2021.

Since the repeal of risk retention requirements for US CLOs in 2018, many CLO managers have locked in future equity commitments by forming strategic partnerships or long-term commitments from anchor investors. Of the 24 managers with at least 20 BSL CLOs under management, six pursued a mix of equity retention strategies last year – AGL Credit Management, Ares Management, Bain Capital Credit, Blackstone Alternative Credit Advisors, KKR Credit Advisors and LCM Asset Management.

“Larger platforms with more established track records price CLO debt at tighter spreads than new issuers, leading to better equity returns for the former, all else equal. However, even larger managers were likely affected by wider CLO debt pricing that peaked in 4Q22, which may be one of the reasons behind managers retaining majority CLO equity,” Fitch notes.

The growth in CLOs that hold majority equity coincides with the overall decline in US BSL issuance, which was down 30% in 2022 from the prior year. Fitch says it views strategic partnerships as a positive for managers and believes that longer-term commitments facilitate CLO platform growth and issuance during periods of market instability.

In other news…

North America
Independent insurance company manager Strategic Risk Solutions (SRS) has appointed Charles “Chuck” Scherer as an svp – insurance-linked securities in its Hamilton, Bermuda office. Reporting to Jonathan Reiss, chairman of SRS Bermuda, Scherer will be a key member of the Bermuda leadership team and will be responsible for further expanding SRS’ influence in the ILS sector.

He has 20 years of experience in the financial services and insurance industries, most recently serving as controller for Roche Surety and Casualty Co. Before that, he worked at Aon Bermuda, Marsh USA, Crum & Forster and Ryan Beck & Co.