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Michelle D'Souza

Lord, Abbett & Co has made clear its intention to move into US CLO management.

The New Jersey-headquartered firm has around $11bn of assets in its US leveraged loan strategy and Adam Backman, partner and head of alternatives at the firm, has told 9fin that CLO management will form part of that business.

“Building a CLO platform is key area of focus within our broader alternatives strategy,” Backman said. “As a leading bank loan manager and an experienced CLO tranche investor, we are well positioned to launch a CLO platform in the new year.”

Kearney Posner, partner and portfolio manager, leads the Lord Abbett’s loan team. Posner, in conjunction with Steve Rocco, partner and co-head of taxable fixed income, will be responsible for leading the development of the firm’s CLO platform.

Sources tell 9fin that Lord Abbott was looking to recruit a CLO portfolio manager to oversee loan strategies and build its CLO franchise earlier this year. Multiple CLO PMs have been in the frame, sources said, but the status of the search is unclear.

Lord Abbett invests in opportunistic credit (through interval funds), private credit portfolios (such as the BDC) alongside its $11bn loan strategy. Each of these has, or will have, a touch point into CLOs.

Lord Abbett’s CLO ambitions were underlined earlier this month when it filed a notice with US regulators for its inaugural BDC, Lord Abbett Private Credit 1. The filing states the firm may “securitize certain of our secured loans or other investments, including through the formation of one or more CLOs”, suggesting mid-market CLOs could also be on the agenda.

Steve Kuppenheimer leads the firm’s private credit business, having joined from Blackstone a year ago. Earlier in his career he was the head of CLOs and structured funds at Merrill Lynch.

Lord Abbett’s private credit offering was boosted in June, when it formed a leveraged lending JV with Stifel Financial.

The asset manager is also an investor in the CLO space with $7bn in CLO tranches. The firm’s Lord Abbett Credit Opportunities Fund, for instance, had 26.91% of assets invested in structured assets, as of 31 March.

From its seat as a CLO investor, the company clearly sees value in the CLO structure. In the fund’s second quarter performance commentary, the firm said CLO debt continues to exhibit attractive characteristics, “particularly as we find issues that out-carry comparably rated corporate bonds with downside protection built into the structure”.

There still hasn’t been a debut US BSL CLO manager in 2024 but in 2023 seven BSL CLO platforms emerged — Antares, Barrow Hanley, Blue Owl, Katayma, MC Credit Partners, Warwick and Wellington.

There are 124 firms managing US BSL CLOs, according to 9fin’s Q2 manager rankings, amounting to $924bn assets under management.

Along with Lord Abbett, there are several other managers planning a move into CLO management.

Most recently, 9fin reported on European CLO manager Arini crossing the Atlantic with a new PM hire, while Chatham Asset Management also signalled a move into US CLOs after hiring Matthew Sosland.

In November, 9fin reported global CLO management was on the agenda for Macquarie Asset Management. In December, 9fin reported Permira Credit is planning a move into US CLO management (the firm later made three additional hires in May and is fund-raising for global captive equity strategies).

In June we reported that Polus Capital Management had picked Jefferies as arranger for its upcoming debut deal, after hiring David Kim last year as its head of US leveraged credit. Jefferies has won the mandate for its first deal.

Obra Capital (formerly Vida Capital) hired former Sculptor US CLO head Peter Polanskyj as senior managing director and head of structured credit, alongside former AllianceBernstein official Scott Macklin to launch CLOs. 9fin reported JP Morgan has picked up the mandate for the firm’s inaugural deal.

Polen Capital meanwhile hired former Mizuho US CLO head Jim Stehli and later former Sound Point US CLO head Rick Richert to launch a US CLO business.

Lord Abbett plots US CLO management in 2025

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