Jamil Nathoo from MidOcean Partners, an expert in CLO business development, shares intriguing insights into the world of Collateralized Loan Obligation fundraising. He discusses the emergence of CLO captive equity funds and their impact on issuance control. Dive into the growing CLO appetite in the Middle East and South America, along with the unique challenges these regions present. Nathoo also elaborates on the importance of local partnerships, investor trust, and the evolving dynamics of fundraising in Asia, particularly among family offices.
Read more
AI Summary
AI Chapters
Episode notes
auto_awesome
Podcast summary created with Snipd AI
Quick takeaways
CLO fundraising dynamics are influenced by evolving investor preferences, with many favoring captive equity funds for their lower fees and established relationships with managers.
Emerging markets like the Middle East and South America present unique challenges for CLO managers, requiring tailored strategies to meet local investment needs.
Deep dives
Types of CLO Equity Funds
CLO equity funds come in two main types: captive equity funds and third-party equity funds. Captive equity funds are usually managed by a single manager who has control over the investments, allowing for a more concentrated strategy. In contrast, third-party equity funds involve a managed pool of various managers, providing diversification but often at the cost of higher fees due to potential double fees. Understanding the differences between these structures helps investors choose the right fit based on their investment strategy and comfort level.
Manager-Driven Differentiation
To stand out in a competitive landscape, CLO managers often implement innovative fund structures aimed at attracting investors. While some managers might opt for traditional, simpler structures to appeal to conservative investors, others may introduce complex features like fee rebates or tranching. These strategies enable managers to appeal to both new and experienced investors, who may have varying levels of sophistication and expectations. As a result, the conversation around CLO fundraising has become more nuanced, with investors increasingly preferring managers who show a clear differentiation in returns and strategies.
Evolving Investor Preferences
Investor preferences have evolved significantly, especially as more sophisticated Limited Partners (LPs) become active in the CLO space. Many LPs now have specific criteria that prioritize not just returns but also deeper relationships with managers they trust. Despite the attraction of diversification through third-party funds, many investors still gravitate toward captive equity funds due to their lower fee structure and the established relationships with managers. This shift indicates a more calculated approach to investment, focusing on long-term partnerships rather than immediate gains.
Global Market Expansion and Challenges
CLO investment is not just confined to the U.S.; there has been notable interest from geographical regions like the Middle East and South America. These regions bring distinct challenges and requirements, as sovereign wealth funds in the Middle East often seek partnerships with managers who can invest locally. Similarly, navigating the diverse investment landscapes of South America requires a deep understanding of each country's regulations and market conditions. As these markets grow, CLO managers must adapt their strategies to meet the specific needs of investors in these regions.
CLO captive equity funds have emerged as an important part of a manager’s toolkit, affording greater control over CLO issuance patterns. In this week’s episode of Cloud 9fin,MidOcean Partners’ Jamil Nathoo tells 9fin’s global head of CLOs Tanvi Gupta about the strengths and weaknesses of certain fund structures.
They discuss new frontiers opening up in the Middle East and South America amid increasing appetite for CLOs and how this poses its own challenges, as well as how to compete with private credit fundraising. This is a conversation you won’t want to miss.
If you have any feedback or would like to get involved in the CLO series on Cloud 9fin, reach out to us at podcast@9fin.com. Thanks for listening.
Get the Snipd podcast app
Unlock the knowledge in podcasts with the podcast player of the future.
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode
Save any moment
Hear something you like? Tap your headphones to save it with AI-generated key takeaways
Share & Export
Send highlights to Twitter, WhatsApp or export them to Notion, Readwise & more
AI-powered podcast player
Listen to all your favourite podcasts with AI-powered features
Discover highlights
Listen to the best highlights from the podcasts you love and dive into the full episode