Private Credit CLOs: 101
A growing part of the broader $1.3 trillion CLO market, private credit CLOs offer the potential for higher spreads relative to broadly syndicated CLOs—creating an interesting opportunity for long-term buy-and-hold investors.
Private credit CLOs (also known as middle market CLOs) are generating a fair share of investor interest, and perhaps rightfully so given the market’s recent growth. At the end of last year, private credit CLOs made up roughly 11% of the broader $1.3 trillion CLO market.1 In 2023, $27 billion of private credit CLOs were issued by twenty-eight managers, which represented over 20% of the total new issue CLO volume.2 This trend is expected to continue, with private credit CLOs forecast to account for more than 30% of total issuance this year.3 This is largely a reflection of the growth in private credit loans more broadly, a market that has increased in size to nearly $1.7 trillion as companies have continued to seek non-bank financing as an alternative to the broadly syndicated market.4
Given the rapid expansion of this asset class and its projected growth ahead, a deeper analysis of the benefits of private credit CLOs, and how they compare to broadly syndicated CLOs, is essential for investors to understand.
1. Source: BofA. As of January 5, 2024.
2. Source: BofA. As of January 5, 2024.
3. Source: JP Morgan. As of November 21, 2023.
4. Source: Citi. As of January 26, 2024.
