Blackstone and State Street Investment Management are set to launch a European collateralised loan obligation (CLO) exchange traded fund (ETF), their first credit partnership in the continent.
The two firms have previously partnered on two US ETFs, sponsored by State Street IM and sub-advised by Blackstone that focus on the loan and high yield spaces.
Read more: Palmer Square Capital Management launches European CLO ETF
Blackstone said that the new vehicle will capitalise on the fast-growing European CLO market, which has grown at an average of eight per cent in the past five years and is currently valued at €250bn (£216.6bn). It is forecast to result in €50bn of issuance by the end of 2025.
The new fund will invest in floating rate AAA rated tranches of Euro-denominated debt issued by CLOs, giving access to European senior secured corporate loans and bonds.
As sub-investment manager of the ETF, Blackstone will actively manage the securities, while, as the ETF sponsor and investment manager, State Street IM is responsible for the governance of the ETF and will also oversee distribution to institutional investors, including asset managers, asset owners, private banks and wealth managers.
The two firms are combining their experience on the new offering. Blackstone is the largest global manager of CLOs and set a record for global annual CLO issuance in 2024, while State Street IM has an extensive track record in the ETF market.
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“Building on more than a decade of partnership with Blackstone, we are excited at the opportunity to provide European investors diversified exposure to the CLO market,” said Ann Prendergast, head of EMEA at State Street IM.
“Both State Street IM and Blackstone have brought our deep expertise and global scale to bear in the development of this product. Through an active ETF structure, we will leverage this expertise with a shared goal of generating higher returns from liquid debt tranches, which have exhibited historically high yields and a low duration risk profile.”
Dan Leiter, global head of liquid credit strategies and head of international for Blackstone’s credit and insurance division, added: “We are excited to partner with State Street to broaden access to liquid credit in Europe. As the largest CLO manager globally, we see strong momentum in Europe, which is an area of conviction and growth for Blackstone and our credit business.”
Read more: First-time CLO managers preparing to enter European market
