Canada’s Government Pension Plan Invests $285 Million in Collateralized Loan Obligations

Posted on October 10th, 2018 at 2:07 PM
Canada’s Government Pension Plan Invests $285 Million in Collateralized Loan Obligations

From the Desk of Jim Eccleston at Eccleston Law LLC:

Canada’s government pension plan, Canada Pension Plan Board (CPPIB) is investing $285 million in collateralized loan obligations (CLOs) managed by Sound Point Capital Management, a New York-based credit hedge fund founded by former Bank of America investment banker Stephen Ketchum.

CPPIB sees CLO equity as an attractive way to boost returns by raising money through the issuing of bonds and equity to outside investors in order to raise cash to buy bundles of below-investment-grade or leveraged corporate loans. 

CPPIB’s purchase of CLOs reflects the increased popularity of the product in response to low-interest rates in safer markets. As a result of low-interest rates, the global CLO market has grown 25% in the past two years to about $700 billion.

Nevertheless, experts point out that CLO equity can be risky because leveraged loan prices could fall at any point in time. For instance, during the 2008 financial crisis, many CLOs stopped paying equity holders. However, unlike other structured investments such as mortgage-backed securities that were completely wiped out in the financial crisis, CLOs resumed payments to investors when loan prices rebounded because leveraged loan defaults were far lower than housing debt.

The attorneys of Eccleston Law LLC represent investors and advisors nationwide in securities and employment matters. The securities lawyers at Eccleston Law also practice a variety of other areas of practice for financial investors and advisors including Securities FraudCompliance ProtectionBreach of Fiduciary DutyFINRA Matters, and much more. Our attorneys draw on a combined experience of nearly 65 years in delivering the highest quality legal services. If you are in need of legal services, contact us to schedule a one-on-one consultation today.

Related Attorneys: James J. Eccleston

Tags: james eccleston, eccleston law, eccleston law llc, eccleston, CPPIB, pension plans, CLO

Return to Archive

TESTIMONIALS

Previous
Next

I just wanted to say thanks again for preparing and executing my case in such a professional manner. It was a pleasure to watch two professionals take such pride in their work, as well as becoming personally in tune with your client (Me). I would personally recommend you and your firm to anyone.

John O.

LATEST NEWS AND ARTICLES

February 22, 2024
Key Considerations for Advisors When Assessing the Financial Soundness of Annuities

While rating agencies like Fitch and S&P Global Ratings generally highlight the strength of annuity issuers, advisors still should scrutinize certain factors in their assessment process.

February 21, 2024
SEC Alleges Fraud Against Morgan Stanley and Former Executive in Block Trading Business

As reported by the Wall Street Journal, the Securities and Exchange Commission (SEC) has charged Morgan Stanley & Co. LLC and its former head of equity syndicate desk, Pawan Passi, with a multi-year fraud involving the disclosure of confidential information related to block trades.

February 20, 2024
Challenges Persist: Firms Struggle to Comply with Regulation Best Interest

FINRA's annual report for 2024 reveals a concerning trend among broker-dealers, with numerous instances of violations of Regulation Best Interest (Reg BI).