Korea Investment to expand CLO portfolio with Anchorage Capital

Korea Investment & Securities Co. will scale up its collateralized loan obligation (CLO) business with New York-based credit-focused 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 that it agreed with Anchorage Capital to forge a partnership to expand its CLO portfolio.

Under the term, KIS US, Korea Investment’s US unit in New York, will invest in the US partner’s credit fund, which will invest in a structured financial product backed by CLO 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, and its investors are offered greater diversity and can enjoy higher-than-average returns from the underlying leveraged loans.    

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

“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 performing loans and bonds, distressed debt, special situations and structured credit. It mainly invests 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 the share of global products for retail investors up to 30% by 2030.

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