Moody's Investors Services top rankings of U.S. CLO managers still includes many familiar names, but the usual suspects lost market share in the fourth quarter of 2014 to some medium-sized managers.
In Moody’s monthly CLO Interest report, released Thursday, the market share for the top 10 U.S. managers fell to 30%, down from 34% a year earlier. The major driver was the pickup in issuance by mid-size asset management firms, with those outside the top 10 in volume (and with five or more CLOs in their portfolios) now accounting for 53% of outstanding CLOs, compared with only 45% a year earlier.
“Medium-sized managers (those with five to nine deals under management) were more active in 2014 than 2013, accounting for 36% of new issuance” compared to 18% in 2013, the report states. The share of new issuance of rated CLOs (which was at record levels of $110 billion in 2014) declined among the top 10 managers to 18% of the market, compared to 25% in 2013, the report noted.
The influence of small- to mid-sized managers is expected to grow as merger and consolidation among CLO managers picks up steam. Moody’s says deals, such as Man Group Plc’s recently announced acquisition of U.S. asset manager Silvermine Asset Management, will continue to surface in 2015 as firms adapt to new U.S. risk retention rules that will require them to retain 5% of the notional value of their deals. The compliance deadline under the final rules approved by federal regulators last month is December 2016.
Last year net outstandings of CLOs increased by 22% to a record $339 billion as of Dec. 31, up from $278 billion at the same point in 2013.
Although the biggest managers lost market share, several large-scale managers increased their assets under management of year’s end. Credit Suisse Asset Management, top ranked in dollar volume, ran $13.1 billion in CLOs outstanding, an increase from the $10.4 billion in December 2013. CIFC Asset Management—which leads the pack in terms of number of deal, at 32—boosted its AUM to $12.4 billion to rank second by volume after finishing 2013 in third place with $11.4 billion.
Those two firms, along with Apollo Global Management with $11.4 billion of assets under management, each surpassed last year’s top U.S. volume AUM leader, Highland Capital, which fell to fourth with $11.3 billion under management compared to last year’s market-leading $12 billion mark.
In Europe, GSO/Blackstone overtook the manager league tables in both deal totals (15) and cumulative assets under management, at 4.5 billion, besting the previous year’s leader Alcentra, which finished second with 13 deals and 4.4 billion in assets.
Moody’s rated 30 European CLOs in 2014 from 18 different managers, with a total par value of 12.4 billion. Twenty of those deals were by top 10 managers accounting for 8.8 billion. GSO/Blackstone led managers with five deals in 2014.
The global CLO manager tables are headed by Carlyle, which has a deal count of 37 and assets of $15.8 billion.
Credit Suisse’s rise to the top of the U.S. tables was abetted by five new transactions in 2014, which also gave it the top spot in assets in CLO 2.0 deals, or those CLOs that have been packaged since the rebound of the CLO market in 2011 after the financial crisis in 2008-2009. Credit Suisse has $9.2 billion of assets in CLO 2.0s, and is tied with Carlyle for the total number (14) of CLO 2.0s under management.
A higher number of managers accessed the global new issuance market in 2014, with 98 participating in new deals (68% of them issued two or more).
In the U.S., the total number of CLO managers increased to 143 from 133 in 2013, and the number of medium-sized managers grew to 26, up from 10. According to Moody’s, the 29 managers that have entered the CLO 2.0 market since 2012 now manage 86 CLOs with a total of $39 billion (or 11% of the market.
Eleven first-time managers closed 21 deals in the U.S totaling $8.5 billion.
The share of CLO 2.0s outstanding grew to 486 totaling $235 billion, which is 58% more outstanding CLO 1.0s and representing about 70% of the U.S. CLO market by AUM, per Moody’s.