Advent to Debut in CLO Market with Apollo’s Seed Funding

(Bloomberg) – Advent Capital Management is launching a platform to manage collateralized loan obligations after receiving seed funding from investing giant Apollo Global Management Inc.

Apollo will provide a “very significant financial commitment” to Advent across equity and debt tranches that will allow the firm to scale a multi-billion dollar platform, Tracy Maitland, Advent’s chief investment officer and president, said in a phone interview. With the money, Advent will manage CLOs backed by broadly-syndicated loans made to large companies. Advent expects to hire three to four additional people to manage the business, Maitland said.

The launch follows a wave of other investment firms building up their alternative credit businesses as a way to mine some yield and protect themselves from inflation. CLOs in particular are drawing new names, partly because floating-rate investments become more attractive as the Federal Reserve gears up a steep interest rate hiking cycle.

“With rising interest rates and inflation, investors want exposure to floating-rate assets, especially in the most senior [tranches] of the capital structure, ”Maitland said. “CLOs have shown remarkable resilience.”

Apollo, one of the world’s largest CLO managers, will also provide “strategic support” to Advent as part of the partnership, according to a statement on May 9.

Late June

Advent expects it will have a credit facility ready to buy its first portfolio of loans by the end of June. The launch will depend on market conditions. The CLO exposure will allow the firm to offer returns and diversification to its clients, who are mainly insurance companies, corporate and public pension funds, he said.

“Advent Capital Management has an excellent track record, shares a disciplined credit approach and is a natural CLO partner for Apollo,” said Brett Leas, head of structured credit at Apollo, in a statement. “We are pleased to apply our capital and expertise to expand the opportunity for Advent to grow and diversify their business while generating attractive risk-adjusted return opportunities for our clients.”

Last month, Israeli firm IBI Investment House teamed up with alternative credit firm CIFC Asset Management to launch a new fund investing in CLOs. IBI expects to invest the CLO capital structure, looking at both debt and equity in the primary and secondary markets in the US

The $ 1 trillion CLO market – the biggest buyers of leveraged loans – has seen some mergers recently. Carlyle Group Inc. agreed to buy Todd Boehly’s investment shop, CBAM Partners LLC, for 787 million, while Blue Owl Capital Inc. purchased Wellfleet Credit Partners in April to jump start an entry into the space.

Advent manages roughly 10 billion across traditional, alternative and closed-end fund strategies. Apollo, which has been led by Marc Rowan since 2021, had approximately $ 498 billion of assets under management as of December 2021, according to the statement.

New issue US CLO sales are down about 12% year-over-year at $ 47.7 billion, data compiled by Bloomberg show.

Read more: CLO Managers Defy Deal Slowdown to Head for Record M&A Year (1)

(Updates with new CLO 2022 sales data in final paragraph. A previous version of this story corrected Advent’s characterization of the deal in first deck headline and second paragraph)

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