CIFC launches European retail fund focused on CLO mezz securities

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U.S. specialty credit firm CIFC has launched its first European-based retail investment fund, with a strategy to pour at least half its money into the more liquid mezzanine tranches of collateralized loan obligation bonds.

The CIFC Global Floating Rate Credit Fund is launching with £50 million (US$65.5 million) of commitments, targeting high-net-worth European and Asian retail investors seeking long-term buys in the securities of U.S. and European CLOs, according to a press release.

The new fund will use at least 50% of its money to acquire the triple-B rated bonds of CLOs, with a target return rate of 7-8%, the press release states. The fund will be managed by New York-based managing director Jay Huang, a Citigroup structured credit veteran who was hired last year as the firm’s senior portfolio manager and head of structured credit products.

“The asset allocation will change depending on market conditions – we will have the flexibility to invest in the best opportunities in the US and Europe,” Huang said in the release.

The actively managed fund will be diversified among 50 to 100 CLOs. About 70% of the assets will be in U.S. CLOs at launch, with the remainder managed in Europe.

The fund will operate under UCITS (Undertakings for Collective Investment in Transferable Securities), the European Union regulatory framework for trading and managing securities in mutual funds.

Although based in Dublin, Ireland, the fund will be U.S.-dollar denominated with currency hedges in sterling, yen and euros. The fund will trade weekly and shares will be priced daily, according to the release, and will be open to U.S. investors as well.

“This fund will enable discretionary wealth managers, funds of funds managers and family offices to access the enhanced returns that the CLO market offers but without the liquidity and diversification challenges that direct investments in CLOs would entail,” CIFC’s European managing director, Joshua Hughes, said in the release.

The announcement of the fund comes one year after CIFC opened a London office to enter the European structured credit market.

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