Cloud 9fin Direct lending CLOs, the sterling edition
Jul 10, 2025
Andrea Fernandez, a partner in Ares’s investor relations and product management for European direct lending, and Mike Dennis, co-head of European credit at Ares, dive into the intricacies of the new sterling-priced CLO. They reveal insights on deploying €30bn in a challenging LBO market, highlighting Italy's attractive investment opportunities amidst a contracting bank sector. The duo shares market strategies, emphasizing bottom-up analysis, and discuss a favorable outlook for private equity as investor confidence remains steady despite volatility.
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Why Sterling for the CLO?
- Ares chose a sterling CLO due to investor demand and regulatory comfort with single currency structures.
- British insurance companies required GBP assets, which influenced the currency decision.
Diversity Drives CLO Structuring
- Portfolio diversity in a single currency is crucial to satisfy rating agencies for European direct lending CLOs.
- This requires strong origination networks capable of providing a diverse GBP asset pool.
Reinvesting Component Enhances Returns
- Reinforcing CLOs allow reinvestment of principal proceeds to compound returns.
- This approach mirrors Ares’ evergreen SMA business, enhancing performance for investors.