US Private Credit CLOs Could Surpass BSL CLOs 

Private credit collateralized loan obligations (CLOs) could potentially overtake broadly syndicated loan (BSL) CLOs in the U.S. market, according to industry data. The shift is driven by the growing demand for higher returns, with private credit CLOs often offering more attractive yields compared to BSL CLOs, which are backed by loans from larger, publicly traded companies. 

According to recent data from the Loan Syndications and Trading Association and Bank of America, the U.S. private credit CLO market saw significant growth by the end of December 2024, expanding by 16% compared to the previous year. This growth resulted in $36 billion in new issuances, indicating a strong demand for private credit CLOs as investors continue to seek higher yields. By the end of last year, private credit CLOs accounted for 19% of the total new issue CLO volume in the U.S. market. 

The main difference between a BSL CLO and a private credit CLO lies in the composition of their loan portfolios. BSL CLOs are composed of loans purchased from the broader market and are usually more liquid and can be traded on the secondary market, allowing for more flexibility and price discovery. BSL CLOs tend to have lower yields compared to private credit CLOs, as they are backed by loans from more established, larger companies. 

Private credit CLOs consist of middle-market or private credit debt. Loans are typically originated from the CLO manager and involve lending to private companies, which are usually smaller or less established than those involved in BSL CLOs. These loans are less liquid and not traded on the secondary market, which can create additional risks but also offer higher yields.