Korea Investment to expand CLO portfolio with Anchorage Capital

The S.Korean brokerage house introduced three CLO products for local retail investors in partnership with Carlyle last year

Korea Investment & Securities' headquarters building in Seoul

Eun-hyeok Ryu 1

2024-05-22 15:33:03 ehryu@hankyung.com

Investment banking

Korea Investment & Securities Co. will scale up its collateralized loan obligation (CLO) business with New York-based investment firm Anchorage Capital Advisors LP as part of efforts to diversify its credit products for local retail investors.

The South Korean securities firm announced on Wednesday it had agreed with Anchorage Capital to forge a partnership to expand its CLO portfolio.

Under the terms, KIS US, Korea Investment’s US unit in New York, will invest in the US partner’s credit fund, which will in turn invest in a structured financial product backed by CLOs and leveraged loans as underlying assets.

Utilizing Anchorage Capital’s board networks, Korea Investment hopes to tap a wide range of global CLO products.

A CLO is a single security backed by a pool of multiple corporate loans with low credit ratings or leveraged loans.

As a CLO is bundled with 200 to 300 loans, its default risk is lower than other structured credit products. Its investors are offered greater diversity and can enjoy higher-than-average returns from the underlying leveraged loans.

Last year, Korea Investment joined with global investment firm Carlyle Group to introduce CLO products to domestic retail investors. It has since rolled out three CLO products for individual investors in Korea.

“We expect to offer global investment products with more diverse structures in the local retail market through our partnership with Anchorage Capital, managing $23 billion worth of credit assets,” Korea Investment said in a statement.

Anchorage Capital focuses on a wide range of assets across the credit spectrum and throughout a company’s capital structure, including non-performing loans and bonds, distressed debt, special situations and structured credit. It invests mainly in the US and Europe.

Korea Investment announced a plan last year to build a system that can guarantee a stable inflow of investment products worth 5 trillion won ($3.7 billion) annually, while ramping up its share of global products for retail investors to 30% by 2030.

Write to Eun-hyeok Ryu at ehryu@hankyung.com
Sookyung Seo edited this article.