Credit Funds Pemberton and Sona Seek Entry into European CLO Market
The European collateralized loan obligation (CLO) market is set to welcome two new players. Credit funds Pemberton and Sona are both seeking to enter the market, which has seen a surge in activity in recent years.
What is a CLO?
A CLO is a type of structured finance product that pools together a portfolio of loans and then issues tranches of debt to investors. The debt is secured by the underlying loans, which are typically corporate loans. The CLO structure allows investors to spread their risk across a large pool of loans, while also providing them with a steady stream of income.
Pemberton and Sona Enter the Market
Pemberton and Sona are both looking to enter the European CLO market. Pemberton is a London-based credit fund that has been active in the European market since 2017. The firm has a track record of successfully managing CLOs and is now looking to expand its presence in the market.
Meanwhile, Sona is a Dublin-based credit fund that has been active in the European market since 2019. The firm has a strong track record of managing CLOs and is now looking to expand its presence in the market.
The Growing European CLO Market
The European CLO market has seen a surge in activity in recent years. According to data from the European Securitization Forum, the total volume of CLOs issued in Europe in 2020 was €37.7 billion, up from €27.2 billion in 2019. This represents a 38% increase in the total volume of CLOs issued in Europe in 2020.
The growth in the European CLO market has been driven by a number of factors. Firstly, the low interest rate environment has made CLOs an attractive investment option for investors. Secondly, the European Central Bank’s quantitative easing program has increased the availability of credit, which has made it easier for companies to access financing. Finally, the European Union’s Capital Markets Union initiative has made it easier for companies to access capital markets.
Benefits of CLOs
CLOs offer a number of benefits to investors. Firstly, they provide investors with a steady stream of income. The income is generated from the interest payments on the underlying loans. Secondly, CLOs offer investors diversification benefits. By investing in a CLO, investors can spread their risk across a large pool of loans. Finally, CLOs offer investors the potential for capital appreciation. As the underlying loans are repaid, the value of the CLO increases.
Risks of CLOs
While CLOs offer a number of benefits to investors, they also come with a number of risks. Firstly, there is the risk that the underlying loans may default. If the loans default, the value of the CLO will decrease. Secondly, there is the risk that the CLO may not be able to meet its debt obligations. If the CLO is unable to meet its debt obligations, the value of the CLO will decrease. Finally, there is the risk that the CLO may not be able to generate sufficient income to meet its debt obligations.
Conclusion
The European CLO market is set to welcome two new players in the form of credit funds Pemberton and Sona. The European CLO market has seen a surge in activity in recent years, driven by a number of factors. CLOs offer investors a number of benefits, including a steady stream of income, diversification benefits, and the potential for capital appreciation. However, they also come with a number of risks, including the risk of default, the risk of not being able to meet debt obligations, and the risk of not generating sufficient income.