Risk Retention

"... an entire ecosystem has been created around financing the portion of risk in each deal that needs to be retained. Fund managers have created risk-retention funds that have lured billions of dollars from big institutions around the world. Some of these investors wouldn't have otherwise invested in CLOs, particularly the riskiest slices of them, because those pieces are often sold in small increments and sometimes aren't worth the time of big investors.

"Wells Fargo's David Preston estimates that more than $7 billion has been raised for such risk-retention funds since March 2016. It's unlikely that CLO managers will be eager to give up these investors, who seem to like the way this structure works."

Bloomberg Gadfly's Lisa Abramowicz
on the collateralized loan obligation market