In December 2022, alternative investment firm Investcorp Credit Management acquired US CLO manager Marble Point, an affiliate of Eagle Point Credit Management, creating what the firms believed would be one of the top 15 CLO managers in the world. Tom Shandell, who led Marble Point and is now head of US CLOs and broadly syndicated loans at Investcorp, tells GlobalCapital about the advantages and challenges of working in a global CLO platform.
Can you take us through the evolution of Investcorp’s CLO platform over the years?
Our CLO business, which currently has $23bn of AUM globally, was established about seven years ago and was initially focused on the European CLO market. At that point, Investcorp’s UK-based group was larger than the US-based team by about two to one.
Meanwhile, we had grown Marble Point [Credit Management] to about $8bn and believed Investcorp’s dual objective of growing its credit business — both organically and inorganically through acquisition — was a good match for Marble Point, as we were seeking a strategic partner to help us go from our early phase of rapid growth into one of systematic growth with access to capital.
Today, Investcorp Credit Management’s $23bn in AUM is represented by around $11bn in European CLOs and $12bn in the US. With our team of more than 50 professionals globally we are well-positioned for future growth.
How do you work as a global CLO team? Is there deep collaboration or is it more siloed?
The answer is that it’s somewhere in between. The European and US teams absolutely collaborate, but we also run as independent platforms.
So how do we collaborate? The largest private equity firms are global and their new leveraged buyouts are the engines that create new loans. Our people on both sides of the Atlantic have relationships with these private equity firms and we work together as one group to foster those relationships.
There are also numerous cross-border transactions involving borrowers that issue both US dollar and euro loans. In those cases, we work together analysing the credit and working to speak as one firm when facing the issuer and its private equity sponsor. We will receive a better allocation when we speak for a larger amount.
Each side of the business — Europe and US — benefits from the other’s relationships. It certainly opens more doors. It was really apparent almost from day one that we were treated better by the sell side because we now were a $23bn AUM manager, as opposed to the $8bn that we spoke for at Marble Point.
Do you think it’s easier to manage an acquisition like this when the larger partner comes from the EMEA region, rather than as a large US-based platform that launches itself into European CLOs?
I do think it helps when we are interacting with parties in the UK. I’ve seen other US-based firms come into the UK and Europe, put a flag down and proceed to operate in a uniquely American way, perhaps ruffling a few feathers.
Since Investcorp’s CLO business has its roots in the UK, I think it opens doors for us. When risk retention rules fell away in the US, a lot of US firms who had solved for EU Risk Retention vertically simply blew out the bonds they owned, making their deals incompatible with EU rules. Due to Marble Point’s permanent capital vehicle listed in the UK, we know and have many European investors.
But with Investcorp Credit Management operating as a European firm, our euro deals are obviously risk retention compliant, which helps us a lot with the relationships [that] our European colleagues already have. I must say it’s so convenient having a UK-based colleague who is able to say: ‘Oh, Tom’s coming over to London next week, let’s have lunch.’
What are your plans for the future of the platform?
Credit is a focus for growth for Investcorp both in the US and Europe. It’s very scalable and CLOs are, in particular, a very efficient way to grow AUM. While it is capital intensive, a $400m CLO today requires about $38m of equity, but the firm can add $400m of AUM in one fell swoop.
Compare that [to] if you went out to raise for a private equity fund. It would take a very long time to raise $400m without using leverage. Here at Investcorp, we’re very focused on growing our credit AUM and very focused on utilising the CLO business as a key source of that growth. We also want to grow other areas of our credit business, such as building our business that invests in CLO debt as well.