Capital Manager Vehicles Demystified

July 10, 2015

In the half-year since the initial release of the final US risk retention rule on CLOs, market participants have been grappling with the ramifications of the coming effectiveness of the rule on 24 December 2016. CLO collateral managers who can develop platforms that allow them to show that they will comply with the US risk retention rule on and after the December 2016 effective date will have an edge with investors today. This is because CLOs issued today will be prospectively subject to the US risk retention rule in the event of a refinancing or repricing or additional issuance of securities after December 2016. This is also because investors will want to develop and/ or maintain relationships with CLO managers who have the ability to solve the risk retention puzzle and thus remain viable players in the market by issuing new paper and building assets under management.

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