The Credit Edge by Bloomberg Intelligence Tetragon Sees Midteens Gain in Riskiest CLO Tranche
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Aug 21, 2025 Dagmara Michalczuk, co-chief investment officer at Tetragon Credit Partners, specializes in the high-risk CLO market. She discusses expectations for collateralized loan obligation equity to yield up to 15% this year, emphasizing the benefits of diversification and leveraging financial engineering. Dagmara highlights risks related to loan defaults and liability-management exercises, as well as the shifting investment dynamics between U.S. and European CLOs. Her insights underscore the growing interest in this asset class amidst economic uncertainties.
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Private Credit Acts As A Buffer
- Private credit so far has been a net positive by refinancing weaker syndicated loans and acting as a patient capital buffer.
- That dynamic can reduce near-term stressed supply and lower accelerated defaults in syndicated markets.
Private Credit Masks Price Discovery Risks
- Heavy private credit capital can erode discipline and obscure true market volatility via delayed price discovery.
- Syndicated loans retain advantages: liquidity, transparency, and the ability to monetize volatility.
Be Selective With New Vintages
- Be selective on vintages: high issuance means not all CLOs will be disciplined or successful.
- Focus on vintage selection, manager skill, and deal components when deploying equity capital.