CLO manager numbers to decline
22 July 2008

Written by Sophie Baker

The number of European collateralised loan obligation (CLO) managers is expected to decline, according to Fitch Ratings.

In a newly published report, Fitch says that challenging conditions in the European leveraged loan market are likely to lead to consolidation in the fragmented CLO asset management industry, and the group expects greater divergence in European leverage loan credit performance to reveal differences between managers’ capabilities and business viability. It says this has remained largely untested so far.

“The number of European CLO managers is likely to decline by about 20 per cent in the next three years. Manager replacement or withdrawal from the market, rather than mergers and acquisitions, will drive consolidation,” said director Manuel Arrive.

The report, European CLO Asset Managers – Survival of the Fittest: The Return, gives an updated overview of the development of the European leveraged loan market and the CLO manager universe, finding that there are over 60 European CLO managers, but half currently have only one or two CLOs under management. Fitch says this shows that 60 per cent of these CLO managers entered the European market opportunistically in 2006-7.