UCITS to form key part of CIFC’s European ambitions

The fund manager plans to take on Europe and wants to make CLOs widely available to investors.

US CLO manager CIFC is looking to launch a UCITS fund as part of its plans to create an outpost in Europe.

Private Debt Investor spoke to CIFC CEO Steve Vaccaro and the firm’s newly-appointed head of European fundraising Joshua Hughes, who revealed their three-stage plan to take on the European market to grow the company further.

Since being founded in 2006, CIFC has been highly active in launching new CLOs and went from just $1.6 billion of assets under management (AuM) at the end of 2006 to $16.2 billion at the end of 2017. This has jumped by a further $2 billion so far in 2018 to $18.2 billion.

Now the firm it setting its sights on Europe and last month announced it has opened a London office and hired Joshua Hughes as its first employee in the city.

The rollout of CIFC’s business in Europe will happen in three stages, with the first being to build relationships with investors in London and on the continent, which is where Hughes comes in.

“At the moment we’re introducing CIFC to the European investor base, but ultimately we will be creating new structures to allow a broader array of investors to partner with us,” Hughes said.

One of the key structures the firm is looking to utilise is UCITS, a popular EU mutual fund structure which, according to Blackrock, has strong brand identity in Europe, Asia and South America and is distributed in over 50 countries due to strong and transparent regulation.

“We’re deep in the process of looking at how to structure a UCITS fund for CLOs to help meet growing investor appetite for floating rate yield. While there are a couple in the market today, it’s a relatively untested model,” said Hughes.

UCITS have several limitations which at first make them appear unattractive for CLO managers, but CIFC believes it can make the structure work.

Vaccarro explained: “UCITS don’t normally allow you to allocate more than 10 percent to syndicated loans, but you can put CLOs into UCITS, so we have an ideal platform to launch a UCITS CLO strategy.”

So far, CIFC’s fundraising efforts in Europe have focused on select groups of investors, predominantly pension funds and family offices, but the UCITS structure will enable the firm to raise capital from other types of institution.

“It would open up the asset class to mainstream wealth managers in Europe who prefer to operate within the UCITS structure,” said Hughes.

Once the firm has a European fund structure in place, it will then look to build out its European operation with additional hires and infrastructure to support the European operation. It intends to eventually have a team of analysts and researchers based in London, mirroring its research-intensive process employed in the US. This research operation will be augmented by support from its existing 28-strong analyst team in North America.

However, Vaccaro said CIFC will tread carefully: We don’t want to rush this, we want to do it right and get something in the market that works for us and works for our investors.”