June 16, 2015

Magnus Wilson-Webb: Risk Retention is Creating Opportunities for Investors

Magnus Wilson Webb

Speaking on the panel, European CLOs: Overview of Structures and Sector Fundamentals at the Global ABS 2015 conference in Barcelona today, Magnus Wilson-Webb, Managing Director of BNY Mellon’s Corporate Trust strategy team said: “As quantitative easing drives down yields across the market, investors are moving down the credit curve to find increased returns. This is bringing new investors into the collateralised loan obligation (CLO) and broader asset backed security (ABS) market. Connected to this, the European Central Banks’ ABS purchase programme, which excludes CLOs, is driving up prices for ABS assets, with the effect of attracting more investors to CLOs.”

“Risk retention is also creating some opportunities for investors,” added Wilson-Webb. “Where risk retention structures are created to hold vertical strips of a CLO an investor in this structure is able to get a blended rate of all tranches. This should appeal to traditional AAA investors such as insurance companies or pension funds which are looking for some yield pick-up. Alternatively, a similar structure, but focused on the purchase of the horizontal equity strip could appeal to hedge funds which have a higher risk tolerance.”

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Malcolm Borthwick
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