Bloomberg News

GoldenTree Co-Founder Wagner Sees CLOs in Top 10% of Great Ideas

December 03, 2012

Leon Wagner, the retired chairman of GoldenTree Asset Management LP, said collateralized loan obligations are in the top 10 percent of attractive investments because they are still cheap after the 2008 financial crisis.

Corporations that are more difficult to finance represent “tremendous opportunity,” according to Wagner, who co-founded New York-based GoldenTree, the $16.9 billion hedge fund specializing in corporate credit. CLOs are a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and return.

“The opportunities in the market are still a function of what happened during the credit crash,” Wagner said today in a television interview on Bloomberg’s “Market Makers.” “The overhang and fear continues such that leverage continues to be underpriced.”

As Europe struggles with a record unemployment rate and the U.S. faces the prospect of tax increases and spending cuts in early 2013, investors are seeking safety in the highest part of a company’s capital structure, pouring $7.5 billion into bank loan funds this year, according to JPMorgan Chase & Co. Nearly $46 billion of CLOs have been sold this year, three times the amount raised in 2011, according to JPMorgan.

To contact the reporters on this story: Erik Schatzker in New York at eschatzker@bloomberg.net; Inyoung Hwang in New York at ihwang7@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net


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