CLO Market Recovering, But It Won't Be Like 2007 Any Time Soon

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A number of CLO deals via Bank of America, Citigroup and Morgan Stanley have made news in recent months, and there's been a pickup in Prudential's CLO activity in the U.K and Europe. While the transactions are leaving those in the space hopeful, any reports that the market is heading back to 2007 levels are greatly exaggerated.

Recent headlines in the market for collateralized loan obligations are starting a buzz that the industry is in recovery mode. Currently, Citi is marketing a $400 million CLO for BlackRock Financial Management. Resource Capital also announced plans to purchase Churchill Pacific Asset Management, acquiring five collateralized loan obligations totaling $1.9 billion overseen by the debt manager.

According to Frank Iacono, partner for advisory firm Riverside Risk Advisors, deals today are different than they were a few years back. Now they're more middle-market focused, with the originators driving the business. Until 2007, it was very much asset management driven.

So, just what are the implications for jobs given this shift and the bashing the sector's experienced? Look to a slow and steady addition of jobs at the analyst level, as originators try to stay away from the errors of the past. But Iacono isn't very hopeful that employment levels will ever get back to where they were three to four years ago.

Some insiders also worry that pending "skin in the game" regulation in Europe and the U.S. will put a kibosh on strong activity in the sector. Others fear what the reemergence of cov-lite deals could mean down the road.

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