MainFirst launches Ucits-compliant loan-based fund

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Frankfurt-based asset manager MainFirst has launched what is believed to be the first Ucits-compliant fund investing in collateralized loan obligations.

The MainFirst CLO Investment Grade fund is designed to target what the German firm sees as one of the fastest growing asset classes in the industry.

Management of the fund will be overseen by head of corporate credit, Norbert Adam, along with fund managers Dr Klaus Ripper, Michael Hombach and Stamatia Hagenstein.

MainFirst said it had chosen to launch the Luxembourg-domiciled fund now because this part of the market is now much more stable than prior to the financial crisis.

It will invest through CLO managers rather than loans themselves because Ucits funds are not allowed to invest in loans directly.

In the process of loan syndication, banks, as well as CLO managers such as Blackstone, negotiate the conditions of the CLO and the appropriate collateral.

Within this there are about 80 loans of different sizes, which are represented by various investment grade tranches, a high yield tranche and an equity tranche.

The fund will focus firmly on the investment grade part of the CLO market, with senior secured loans making up 90-95% of portfolio exposure.

The MainFirst team selects CLO managers who have a proven track record with below-average default rates. It uses a mixture of quantitative and qualitative analysis to uncover appropriate CLO managers.