The continual search for yield across the credit markets has driven new investor groups into Europe's traditionally clubby and private mezzanine market. Larger deal sizes, increased liquidity and an ever-more active secondary market have all helped tempt private equity funds, institutional investors and, inevitably, hedge funds into the mezzanine market this year. But for some, notably the large mezzanine players, the entry of new groups into the asset class threatens the safety of the asset class and some say could lead to losses further down the line.

For the average collateralized loan obligation (CLO) manager, hedge fund or institutional investor, getting hold of mezzanine paper is not an easy task. Traditionally, mezzanine transactions were small - less than EURO150 million - and placed privately among a small number of large mezzanine investors. That has changed over the past year with the market experiencing rapid growth in deal size, liquidity and the number of investors participating in the market.

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