According to Thomas and Ilina, CLOs are well suited for the current environment as they allow managers to structure the portfolio around medium-term views. Interest rates are likely to remain at least non-zero over the next five years, while trade tariffs and broader geopolitical shifts will lead to further uncertainty. In the medium term, this suggests a pullback from unconstrained globalization and a shift towards more regionally focused business models.

The team has seen a significant number of deals starting to launch since early May. The secondary loan market has recovered strongly alongside other markets, and a number of deals that were previously postponed are now returning to the market. Thomas and Ilina expect good primary volumes in the coming weeks and months.

LGT Capital Partners’ semi-liquid private credit offering follows a multi-strategy approach, of which CLOs are an important component. This approach gives the team the flexibility to shift towards areas offering more attractive returns over time. While certain strategies may be more appealing in certain periods, each strategy offers its own value. For Thomas and Ilina, the key is balancing volatility, liquidity, returns and cash.

Read the full interview here.