CLO Issuance and the Use of Captive Equity Funds Increase

According to Bloomberg, CLO issuance has hit record levels, largely due to the increased use of captive equity funds (investment funds that are fully controlled or sponsored by a single company)   Some industry participants are skeptical of the use of captive equity funds, saying that “it weakens the external check” and over time, loan portfolios could be exposed to aggressive debt maneuvers and lower credit quality. Bloomberg notes that captive funds purchased the substantial majority of the CLO equity created last year.

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