Expanding Global CLO Market Offers Insight into Technology Sector Dominance and U.S. Market Maturity

News provided by

Mar 06, 2024, 19:45 ET

DUBLIN, March 6, 2024 /PRNewswire/ -- The "Global Collateralized Loan Obligation Market: Analysis By Value, By BWIC Value, By Issuance, By Sector, By Rating, By Type, By Investor Base, By Region Size and Trends with Impact of COVID-19 and Forecast up to 2028" report has been added to ResearchAndMarkets.com's offering.

The global CLO market was valued at US$1.26 trillion in 2022 and is expected to reach US$2.71 trillion by 2028. A collateralized loan obligation (CLO) is a structured financial product that pools together a diversified portfolio of corporate loans and packages them into different tranches of securities. These tranches, varying in risk and return profiles, are sold to investors. The US issuance reached US$136.82 billion in 2022. On the other hand, the Europe CLO market issuance reached US$27.64 billion by the end of 2022.

Looking ahead, the CLO market is expected to continue its growth trajectory for several reasons. The ongoing search for yield in a prolonged low-rate environment is likely to persist, sustaining investor interest in CLOs. As economic conditions improve, the credit quality of underlying loans may strengthen, further boosting investor confidence. The maturation of global CLO markets and the establishment of regulatory frameworks contribute to increased market stability and attractiveness.

Additionally, continued innovation in CLO structures, including the incorporation of technology and the adaptation to evolving market trends, positions the CLO market for ongoing growth. The market is expected to grow at a CAGR of approx. 14% during the forecasted period of 2023-2028.

Market Segmentation Analysis:

By Sector: The technology segment held the highest share of the market. Technology companies often exhibit strong fundamentals and resilience, making them attractive to investors seeking high returns in a rapidly evolving digital landscape. The sector's transformative impact on various industries and its role in driving economic advancement contributes to the positive outlook for CLO investments.

By Region: The US held the highest share in the global CLO market and is expected to be the dominant region in the forthcoming years. The maturity of the US CLO market, compared to other countries, can be attributed to several factors. Firstly, the US has a well-established and diverse financial ecosystem with a long history of structured finance. The legal and regulatory framework in the US is conducive to the creation and management of complex financial instruments like CLOs. Additionally, the US has a large and dynamic corporate sector, providing ample opportunities for the origination of leveraged loans that form the basis of CLO portfolios.

By BWIC: Investors utilize BWIC platforms to optimize their portfolios, adjust risk exposures, or capitalize on market opportunities. The growth is fueled by the desire for more efficient CLO trading mechanisms, providing a valuable avenue for market participants to navigate the complexities of the CLO market. The US CLO BWIC market has been further analysed based on the ratings.

By Type: IG CLOs are considered lower-risk and typically have a higher credit quality compared to Non-IG CLOs. The investment in IG CLOs is growing in the US due to the appeal of stable, higher-rated assets, attracting risk-averse investors seeking more conservative fixed-income options. In a low-interest-rate environment, the pursuit of yield has driven interest in Non-IG and EQ CLOs, while IG CLOs continue to attract investors prioritizing credit quality and stability in their portfolios.

By Rating: CLOs receive credit ratings from rating agencies, with AAA being the highest rating indicating the least credit risk. The demand for AAA-rated CLOs is higher than for Equity CLOs due to their superior credit quality and lower risk.

By Investor Base: The Bank segment held the highest share in the US's AAA-rated CLO market in 2022. On the other hand, Asset Manager, Insurance & Pension held the largest share in the US's Equity CLO market.

Market Dynamics:

Growth Drivers: The global CLO market growth is predicted to be supported by numerous growth drivers such as growing leveraged loan market, growing private debt, increase in TRACE trading, narrowing bid/ask spread, high comparative risk-adjusted returns, low default rates, favorable government regulations, diversification benefits, increasing risk appetite and investor confidence, and many other factors. As the leveraged loan market expands, it provides a larger pool of assets for CLO issuances.

This growth is particularly influential for CLO managers, who can access a diverse set of loans to construct portfolios with varying risk and return profiles. The demand for leveraged loans as CLO collateral contributes to the creation of more CLOs, attracting investors seeking exposure to higher-yielding debt instruments. The symbiotic relationship between the leveraged loan and CLO markets highlights how the expansion of one positively influences the growth and vibrancy of the other, creating opportunities for both issuers and investors in the structured finance landscape.

Challenges: The market growth could be negatively impacted by various challenges such as economic policy uncertainty, liquidity risk, complexity and understanding.

Trends: The market is projected to grow at a fast pace during the forecast period, due to various latest trends such as increasing exposure to SOFR loans, increasing adoption of innovative technologies, increasing demand for ESG-compliant CLOs, globalization of CLO market, innovation in CLO structure, increasing focus on middle market, etc. In CLO market, technology solutions have emerged as a vital catalyst in mitigating obstacles (such as identifying attractive investment opportunities, navigating reinvestment period constraints, balancing risk and return, etc.) and making CLO management easier and fund managers more effective.

Competitive Landscape:

The global CLO market is competitive in nature which means there are numerous asset managers and financial institutions actively involved in structuring, managing, and issuing CLOs. Major financial institutions, investment banks, and specialized asset management firms often compete to attract investors and participate in CLO transactions.

The key players in the global CLO market are:

Morgan Stanley
Prudential Financial
BlackRock
Apollo Global Management
Ares Management
MassMutual
Conning,
HPS Investment Partners
Brigade Capital Management
Neuberger Berman
CIFC Asset Management
Blackstone

CLO market players employ various strategies to increase their market share, including proactive portfolio management, strategic client relationships, and innovative deal structuring. Moreover, several partnerships and initiatives have been undertaken by CLO market players to help increase CLO market growth. F

Key Topics Covered:

1. Executive Summary

2. Introduction
2.1 Collateralized Loan Obligation (CLO): An Overview

3. Global Market Analysis
3.1 Global CLO Market: An Analysis
3.2 Global CLO Market: Sectors Analysis

4. Regional Market Analysis
4.1 The US CLO Market: An Analysis
4.2 Europe CLO Market: An Analysis

5. Impact of COVID-19

6. Market Dynamics

6. Market Dynamics
6.1 Growth Drivers

Growing Leveraged Loan Market
Growing Private Debt
Increase in TRACE Trading
Narrowing Bid/Ask Spread
High Comparative Risk-adjusted Returns
Low Default Rates
Favorable Government Regulations
Diversification Benefits
Increasing Risk Appetite and Investor Confidence

6.2 Challenges

Economic Policy Uncertainty
Liquidity Risk
Complexity and Understanding

6.3 Market Trends

Increasing Exposure to SOFR Loans
Increasing Adoption of Innovative Technologies
Rising Demand for ESG-Compliant CLOs
Globalization of CLO Market
Innovation in CLO Structure
Growing Focus on Middle Market

7. Competitive Landscape
7.1 Global CLO Market Players: Competitive Analysis
7.2 Global CLO Market Players by Asset under Management

8. Company Profiles

For more information about this report visit https://www.researchandmarkets.com/r/qxgfvv

About ResearchAndMarkets.com

ResearchAndMarkets.com is the world's leading source for international market research reports and market data. We provide you with the latest data on international and regional markets, key industries, the top companies, new products and the latest trends.

Media Contact:

Research and Markets
Laura Wood, Senior Manager
[email protected]

For E.S.T Office Hours Call +1-917-300-0470
For U.S./CAN Toll Free Call +1-800-526-8630
For GMT Office Hours Call +353-1-416-8900

U.S. Fax: 646-607-1907
Fax (outside U.S.): +353-1-481-1716

Logo: https://mma.prnewswire.com/media/539438/Research_and_Markets_Logo.jpg

SOURCE Research and Markets