Hedge funds, including ex-Credit Suisse star trader Hamza Lemssouguer’s Arini, are making a push into the $1.3tn US collateralised loan obligation (CLO) market, unveiling debut vehicles and stepping up competition for scarce leveraged loan supply, according to a report by Bloomberg.
Arini priced its first US CLO in April, while Anthelion Capital, a tech-driven hedge fund manager, is reportedly preparing its own debut CLO in the coming weeks, working with Natixis on the deal. The move follows Macquarie Asset Management’s entry into the US CLO market earlier this month.
The latest wave of entrants highlights growing appetite from alternative asset managers to capture yield from structured credit amid shifting credit market dynamics.
The launches come as fresh capital flows into the CLO space, driving robust demand for leveraged loans and lifting prices in both primary and secondary markets. The average loan price has climbed above 96 cents on the dollar, up from below 94.5 cents in April, according to Bloomberg data—underscoring the impact of CLO demand on broader credit conditions.
“It really feels like we’re back in a situation where CLO debt demand is outpacing supply,” said Kevin Wolfson, CLO portfolio manager at PineBridge Investments. “Managers are increasingly turning to the secondary market to fill their warehouses, as primary issuance remains tight.”
CLOs, which package risky corporate loans into tranches with varying levels of risk and return, remain the dominant buyers of leveraged loans – accounting for roughly two-thirds of the US market. The recent surge in warehouses – temporary lines of credit – particularly from hedge funds and credit specialists new to the CLO space, suggests the market is poised for continued issuance momentum.
Silver Point Capital, Diameter Capital Partners, and Elmwood Asset Management — all hedge fund or hedge fund-adjacent platforms – have registered new CLO warehouses in Europe this year, according to data from Barclays. The number of open US warehouses is currently well above the historical average, while Europe is seeing record highs.
“Managers want to have optionality,” said James Baillie, partner at law firm Paul Hastings, noting that many are running multiple warehouses simultaneously to move quickly during periods of market dislocation. “Volatility creates opportunity – especially for active CLO managers.”
Hedge fund entrants are finding favourable conditions for deploying capital. Arini’s Mehdi Kashani, head of structured credit, noted that recent spread widening allowed the fund to “source good quality assets at great prices” for its debut CLO. Macquarie’s Vivek Bommi added that market volatility offers “a great backdrop” for active credit selection and performance generation.
Yet, some managers are holding back on new issuance. Spreads on CLO bonds rated AAA, which make up the largest portion of the structure, remain relatively wide compared with loan prices, and need to tighten further to make the economics work, market participants said.
