CLO Market surges to US$1trn as Palmer Square marks 10 years of indices and expands global ETF platform

The value of the global CLO market has grown by a factor of approximately 2,500 in the last decade, according to Palmer Square Capital Management.

In its latest statement announcing the 10th anniversary of its CLO debt indices, Palmer Square, says the CLO market, “is one of the fastest growing areas of global structured credit, growing from approximately US$400m 10 years ago to more than US$1trn in market value.”

Speaking to SCI, Chris Long, CEO and founder at Palmer Square, says the CLO market has benefited from the widespread demand for floating rate assets from new investors after a period of low interest rates following the 2008 financial crisis, but the scalability the CLO market now has to offer is particularly enticing for larger investors.

“While the demand for floating rate assets is not new, there is an increased demand from new investors after a long period of low interest rates. Additionally, with the size of the CLO market now, it has become the most scalable triple-A floating rate option for investors like US and Japanese Banks as well as large asset managers.”

Long explains the significant growth already seen in the CLO market has given the asset class considerable status among investors.

“The overall size of the CLO market begets more growth and makes it hard to miss illustrating to investors that CLOs are a major factor in the corporate credit ecosystem and not a small corner of the market.”

He also points out that the CLOs as an investment vehicle have diversified to meet the needs of investors.

“CLOs as an investable asset class themselves have diversified in the past decade. The most notable development is the development of reinvesting vs static CLOs. What’s more, reinvesting CLOs have further diversified with one, two, three and five-year reinvesting periods. There are now several CLO tranche durations available from static to a five-year reinvestment period so that investors can chose what suits their needs.” 

Tapping into this demand from institutional investors, Palmer Square launched two ETFs PSQA and PSQO in the US in September 2024. PSQA is the first and only passively managed US CLO-focused ETF and was launched alongside PSQO, an actively managed multi-asset ETF with access to CLO debt as well as other credit asset classes including corporate credit, bank loans, and other ABS.

The firm announced in January that it would be following this with the announcement of the launch of three EU CLO-focused ETFs later in the year which are still to be officially unveiled.

Long tells SCI the upcoming launch in Europe will supplement Palmer Squares existing CLO-focused ETF portfolio and its CLO debt indices, bringing the firm’s CLO investment platform “full circle”.

“These two US products along with the upcoming launch of our UCITS EUR CLO ETF, which will be benchmarked to our Palmer Square EUR CLO senior debt index and the only passively managed EUR CLO-focused ETF available to non-US investors really bring the market adoption of the Palmer Square Global CLO Indices full circle with products available to CLO investors across the globe.”