U.S. private credit CLOs total nearly $200 billion

U.S. private credit CLOs total nearly $200 billion, part of a global CLO market Barings sizes at about $1.5 trillion. The estimate comes from Steve Page, a portfolio manager in the firm's structured credit group, writing in Barings' Where Credit Is Due newsletter published by Insurance AUM Journal on Oct. 22.

Barings puts U.S. broadly syndicated CLOs at more than $1 trillion, U.S. private credit CLOs at nearly $200 billion and European CLOs at roughly $300 billion. The private credit piece bears most directly on wealth portfolios because it securitizes the privately negotiated loans that direct-lending funds and BDCs hold.

The due-diligence question is where the CLO sits in the capital stack, because debt tranches, CLO equity and a financed loan book carry different leverage and mark sensitivity. Access is widening through ETFs, which place a multi-year securitization inside a daily-liquid share class.

Barings says the CLO structure is moving into direct lending and infrastructure debt. For a lender, securitizing a loan pool funds a book without holding all of it on balance sheet. Applying the structure to private loans pushes securitization into a market built on holding loans to maturity.

The difference shows up in valuation. A broadly syndicated CLO holds loans that change hands in a secondary market. A private credit CLO holds loans negotiated bilaterally and priced by the manager. The tranching and loss-absorbing protections can look the same, but the price discovery does not. That difference lands on whoever holds the tranche, and it makes a manager's loan-level valuation policy a due-diligence item.