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Creditflux 2016 risk retention presentation

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Creditflux 2016 risk retention presentation

  1. 1. Risk retention – who’s done what Sayed Kadiri Creditflux bit.ly/investorsummit
  2. 2. Rank Manager 2.0 AUM ($bn) Annual growth ($bn) Annual risk retention ($m) 1 CSAM 13.25 2.56 128.06 2 Ares 11.81 2.28 114.00 3 Carlyle 11.67 2.32 116.00 4 GSO 11.22 2.14 107.04 5 Apollo 10.65 1.89 94.72 6 CIFC 9.85 1.79 89.30 7 PGIM 9.70 2.20 109.83 8 Octagon 9.52 2.14 106.89 9 Golub 8.76 2.15 107.50 10 BlueMountain 8.14 1.59 79.52 Rank Manager 2.0 AUM ($bn) Annual growth ($bn) Annual risk retention ($m) 11 Voya 7.95 1.62 80.76 12 MJX 7.54 1.77 88.71 13 Och-Ziff 7.50 1.76 88.24 14 Bain 7.42 1.59 79.37 15 CVC 7.35 1.58 79.08 16 Oak Hill 6.72 1.29 64.55 17 Fortress 6.67 1.63 81.34 18 Sound Point 6.45 1.61 80.63 19 Guggenheim 6.41 1.27 63.48 20 Onex 5.95 1.40 69.89 The CLO market’s big hitters
  3. 3. Rank Manager 2.0 AUM ($bn) Annual growth ($bn) Annual risk retention ($m) 54 TPG 2.43 0.97 48.60 57 Triumph 1.90 0.76 38.00 88 Wellfleet 1.12 1.03 51.69 Risk retention-compliant CLOs
  4. 4. Rank Manager 2.0 AUM ($bn) Annual growth ($bn) Annual risk retention ($m) 54 TPG 2.43 0.97 48.60 57 Triumph 1.90 0.76 38.00 88 Wellfleet 1.12 1.03 51.69 • 46 managers have issued more than $3 billion of 2.0 CLOs • 110 managers have printed at least one deal since 2010 • 72 US CLO managers have printed deals in 2016 and 40 managers have completed a risk-retention compliant CLO Risk retention-compliant CLOs
  5. 5. CLO manager 3rd party investor Majority-owned affiliate CLO 85-90% stake 10-15% stake Collateral management agreement 5% risk retention Option 1: MOA
  6. 6. CLO manager 3rd party investor Majority-owned affiliate CLO 85-90% stake10-15% stake Collateral management agreement 5% risk retention Pros • Fairly quick and cheap to establish • It can be converted into a C- MOA with relative ease • There is limited impact on the operations of the existing CLO manager Cons • Typically, it does not comply with EU risk retention • Manager has to put in at least 10-15% Option 1: MOA
  7. 7. ZAIS Group 3rd party investor Majority-owned affiliate ZAIS Group CLO 49% stake 51% stake Collateral management agreement 5% risk retention Spotlight on ZAIS Group
  8. 8. 40/86: Credit manager for insurance company Voya: Alternative credit manager with insurance business Fidelity: Part of insurance and mutual fund family Anchorage: Hedge fund manager Marathon: Hedge fund manager Och-Ziff: Hedge fund manager Zais: Hedge fund manager CSAM: Large credit manager, part of Credit Suisse bank GSO: Large credit manager TPG: Credit management arm of PE giant TPG Angelo Gordon: Alternative credit manager Black Diamond: Distressed, private equity and CLO manager Octagon: CLO and structured credit manager owned by Conning Sound Point: Alternative credit manager Steele Creek: CLO manager owned by Moelis Wellfleet: Credit management arm of PE firm Littlejohn Who is using or planning an MOA?
  9. 9. Registered investment advisor 3rd party capital Capitalised-majority owned affiliate CLO 85-90% stake 10-15% stake Management services agreement 5% risk retention Collateral management agreement Option 2: C-MOA
  10. 10. Registered investment advisor 3rd party capital Capitalised-majority owned affiliate CLO 85-90% stake 10-15% stakeServices agreement 5% risk retention Collateral management agreement Pros • From a US operations perspective, relatively easy to set up • C-MOAs can be used to comply with US and European risk retention rules Cons • Dual-hatting of certain employees is required • Manager has to put in at least 10-15% Option 2: C-MOA
  11. 11. Option 3: CMV Existing CLO manager Master fund CMV CLO 100% ownership Management services agreement 5% risk retention Collateral management agreement
  12. 12. Option 3: CMV Existing CLO manager Master fund CMV CLO 100% ownershipManagement services agreement 5% risk retention Collateral management agreement Pros • CMVs can be used to achieve compliance with US and European risk retention rules • Manager is not obliged to put any capital into the CMV Cons • Dual hatting of certain employees is required • Can be fairly time-consuming and costly to establish • Needs to demonstrate real independence from original manager – separate board, credit committee
  13. 13. Spotlight on Napier Park Napier Park Master fund Regatta Loan Management CLO 100% ownership Management services agreement 5% risk retention Collateral management agreement
  14. 14. Who is using or planning a CMV Apollo BlueMountain GoldenTree Napier Park Oaktree Triumph Capital
  15. 15. Existing manager 3rd party investors New CLO manager CLO 2 Majority stake Minority stake Sub-advisor 1 Sub-advisor 2 Sub-advisor 3 CLO 3CLO 1 Management services agreement The multi-manager solution
  16. 16. With thanks to White & Case, Dechert, Cadwalader, Seward & Kissel, ZAIS Group and Napier Park. For more information please contact Sayed Kadiri at sayed.kadiri@creditflux.com

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