2026’s macro-outlook points to slower, but resilient global growth driven by AI, supportive fiscal policy and easing financing conditions, though unevenly spread as some face risks from trade tensions, especially from US tariffs. Based on the current macroeconomic environment and the resilient performance of CLOs, this discussion will focus on the intersection of monetary policy, credit quality and structural shifts in financing. 

The CLO market remains strong, with record issuance in the U.S. and Europe driven by demand for risk-adjusted returns. Private credit CLOs and middle market loans are growing rapidly, while CLO ETFs have broadened the investor base beyond institutions. Managers are locking in favourable terms through refinancings and resets and innovative structures such as long-duration CLOs and evergreen warehouses. Despite robust activity, investor caution has increased following recent high-profile defaults, leading to greater selectivity and emerging price tiering among managers. CCC buckets remain stable, but consolidation looms as some managers have not issued recently, signalling potential M&A ahead. Panellist will discuss: 

• Why have spreads remained tight? Is this a cyclical or structural trend? 
• What triggers could cause spread widening in 2026?  
• How are managers positioning for market volatility? Will we see increase CLO manager M&A? 
• Is the ‘expensive’ market here to stay or will repricing bring discipline? 

LMEs have become a key tool for managing debt maturities, driven by loose documentation and high refinancing costs. Creditors are responding to aggressive tactics with ad hoc committees, while UK legal challenges push for fairness to minority creditors encouraging cooperative agreements. Techniques such as extend-and-exchange, tiered co-ops, pari plus double dips are gaining traction. Private credit continues to support distressed companies, often via PIK structures, but CLOs face ‘par burn’ losses as recoveries on first-lien debt decline. Managers must factor LME risks into scenario analysis and recovery assumptions, as smaller players may exit early. Although LME activity fell in 2025 and may ease in 2026, evolving structures and co-op agreements remain important. 

• How do aggressive LME tactics impact CLO recovery assumptions and risk management? 
• Are new techniques like double dips and tiered co-ops improving flexibility or creating systemic risk? 
• What role does private credit play in supporting distressed companies, and what does this mean for CLO investors? 
• How can CLO managers mitigate ‘par burn’ losses and tail risk?

2026 is poised for a busy 2026 driven by renewed dealmaking, which is positive for CLO supply. While M&A and LBO volumes are expected to accelerate significantly in both the U.S. and Europe, fuelled by stabilising interest rates and private equity firms sitting on substantial ‘dry powder’. However, whilst market participants expect strong issuance volumes, competition for quality assets between private credit and BSL markets is intensifying, leading to more ‘borrower-friendly’ conditions and a rise in cov-lite terms, increased tolerance for higher leverage and more frequent use of PIK features. Significant performance divergence is expected between high-quality and lower-rated, more challenged names in sectors such as chemicals or automotive.  

• What key factors are driving the resurgence in M&A and LBO activity? Which sectors are seeing the strongest deal flow, and which remain under pressure? 
• Are we witnessing a trend toward mega-deals or is the focus shifting to smaller, strategic transactions? How is the current wave of M&A and LBO activity shaping CLO issuance and portfolio construction? 
• What impact is intensified competition between private credit and BSL markets having on deal terms? Are cov-lite structures and PIK features here to stay? 
• Will performance divergence between high-quality and challenged credits create new opportunities or amplify risk for CLO managers? 

The CLO manager landscape is under a dual transformation; consolidation amongst established players and the emergence of new entrants. Larger firms are acquiring CLO platforms to achieve scale and operational efficiency, while smaller managers face mounting pressure to grow or risk being absorbed. At the same time, private debt managers and sponsored startups are entering the market, leveraging CLOs to access broader investor bases and diversify funding. This session will explore what’s driving these trends, how manager tiering impacts issuance and spreads and what investors should expect as middle market CLOs gain traction.  

• What’s behind the wave of consolidation among CLO managers? How do you value a CLO manager? 
• How does manager tiering affect issuance dynamics and pricing? 
• What strategies are being used by startups to succeed and how are middle market CLOs shaping this trend? 
• Will consolidation continue or will disruption from new entrants disrupt the status quo? And what will this mean for the CLO ecosystem?

The secondary CLO market remains robust, driven by strong demand for high-grade tranches and the growing influence of CLO ETFs. Trading seems concentrated in AAA and other investment-grade paper, reflecting investor caution and preference for stability amid economic uncertainty. ETFs have emerged as a major liquidity source, reshaping market dynamics and attracting new investor segments, while higher spreads in private credit and middle-market CLO secondaries offer opportunities. Some credit deterioration in underlying loans has increased focus on manager track records and risk management. However, secondary markets are often providing better value than primary, particularly in discounted tranches like single-Bs, and are widely being used for portfolio rebalancing, liquidity management and relative value plays. 

• How are traders finding value across the capital stack given the current spread environment? 
• What makes secondary trading more attractive today compared to primary? 
• How is credit deterioration impacting managers’ approach to risk management? 
• How are CLO ETFs changing market dynamics and investor behaviour? 

This discussion will explore AI’s impact as a transformative tool in trading and due diligence, and as an emerging asset class. While AI adoption promises efficiency and insight, it also introduces risks from valuation bubbles to leveraged exposures in AI infrastructure. Investors face challenges in assessing real versus hype-driven opportunities, managing credit risk as AI reshapes industries and navigating potential defaults if AI investments fail to deliver returns. This session will examine how managers can integrate AI into risk frameworks and what the rise in hyperscaler debt means for structured credit markets.  

• How is AI being integrated into trading and due diligence processes and what impact could this have on credit analysis?  
• What risks are there if asset prices correct sharply given the high leverage in AI infrastructure? 
• As AI spreads tighten and borrowers operate with leveraged balance sheets, how should managers assess the risk of disruption from AI-enabled competitors?  
• Hyperscalers are heavily leveraged to fund AI infrastructure – how effective are tools like SRTs and CDS to manage exposure and mitigate potential defaults?  

Private credit and middle-market CLOs are gaining market share from broadly syndicated loans (BSL), driven by regulatory pressures and stricter bank capital requirements under Basel III Endgame. Banks are increasingly partnering with private credit firms to originate and distribute assets for PC CLOs. The spread gap between AAA-rated BSL and MM CLO tranches is narrowing, while cov-lite structures migrate from BSL to MM/PC space, though private credit generally maintains tighter covenants. Anticipated growth in M&A and LBO activity should provide a strong pipeline of new loans for CLO packaging. 

• How will Basel III Endgame accelerate the shift toward private credit CLOs? 
• Does narrowing spread differential between BSL and MM CLOs signal long-term convergence? 
• Will tighter covenants in private credit CLOs offset risks from cov-lite migration? 
• How significant is the expected M&A and LBO pipeline for sustaining issuance growth? 

The CLO market continues to deliver consistent returns for investors with robust, high volumes driven by supportive interest rates, balanced risks from tighter spreads and increased, but manageable credit vulnerability. Following record issuance in 2025, 2026 is expected to see strong new CLO issuance with tightening spreads providing a ‘safe haven’ for investors, if they are selective. However, the focus is shifting from ‘pure carry’ to active, selective investing prioritising experienced managers who can navigate potential credit deterioration and capitalise on market volatility. This panel will discuss:   

• How are investors approaching manager due diligence to identify managers with ‘operational alpha’ especially as 2026 is expected to be an ‘unforgiving year’ for those with high CCC migration? 
• How are investors balancing the impact of lower credit stress against the potential for compressed floating-rates as the Fed continues to cut rates? 
• How are investors assessing ‘hidden leverage’ such as PIK debt and NAV lending and the growing prevalence of LMEs when evaluating the resilience of CLO equity and junior mezzanine tranches?